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Lahore, October 30, 2019 (PPI-OT): The Ghani Global Group of Companies recently underwent a scheme of arrangement which resulted in the transfer of the manufacturing undertaking, along with all assets and liabilities, of Ghani Global Holdings Limited (formerly “Ghani Gases Limited”) to subsidiary, Ghani Chemical Industries Limited (Ghani Chemicals). The previous ratings correspond to Ghani Gases Limited while the current rating corresponds to Ghani Chemical Industries Limited.
The ratings recognize Ghani Chemicals’ prominent position in the industrial and medical gases sector. The industry largely possesses oligopolistic structure, benefiting the players. Recent slowdown in demand for industrial gases from key sectors, in line with the overall economic slowdown, has kept product prices depressed, reflected in a decline in the Company’s margins at gross and operating level. Simultaneous increase in working capital needs on account of slow recovery from customers in the health sector led higher short-term borrowing, which increased finance cost substantially, leading the Company to book a net loss for FY19.
Resultantly, cashflows and coverages witnessed a downturn, highlighting financial risk despite moderate leveraging. Ghani Chemicals’ third 110TPD plant has been set up and is expected to commence commercial operations in 1HFY20. The Company will be taking on additional debt to make payment for the new plant, due in Dec-19, which may exert further pressure on coverages. Smooth functioning of the new plant and timely generation of incremental cashflows remains critical to the Company’s performance. Given the Group’s expansionary stance and stressed financial performance, sponsors have committed to sustained vigilance and support, as extended in the past.
The ratings are dependent on the Company’s ability to effectively utilize enhanced capacities. At the same time, management of financial risk, particularly debt coverages, remains important, wherein any further dilution would have negative implications for the ratings. Sustained market share and, in turn, improved margins would support ratings.
For more information, contact:
Analyst
The Pakistan Credit Rating Agency Limited (PACRA)
Awami Complex, FB1, Usman Block New Garden Town,
Lahore – Pakistan
Tel: +9242 586 9504 -6
Fax: +9242 583 0425
Email: hammad.rashid@pacra.com
Web: www.pacra.com