Pakistan Oxygen upgraded to ‘A+’ with stable outlook

July 28, 2025(MLN): The Pakistan Credit Rating Agency Limited (PACRA) has upgraded the long-term entity rating of Pakistan Oxygen Limited (PSX:PAKOXY) from ‘A’ to ‘A+’, while maintaining the short-term rating at ‘A1’. The outlook on the ratings remains ‘Stable’, according to the latest press release issued by the agency.

The upgrade reflects the company’s strong market presence, robust growth trajectory, and enhanced profitability, positioning it as a key player in Pakistan’s industrial and medical gases sector.

Operating since 1949, PAKOXY commands a leading position across its business segments, including industrial and medical gases, welding electrodes, and Medical Engineering Services (MES).

The company maintains a broad customer base and a prominent footprint in Pakistan’s structured gases industry, with a domestic production capacity of around 1,500 tons per day (TPD).

In the electrodes segment, , PAKOXY leads the Tier-I category and maintains an active presence across the largely unorganized Tier-II and Tier-III markets.

The demand for medical gases continues to rise amid improvements in healthcare infrastructure, rapid urbanization, and growing public health awareness.

Meanwhile, demand for industrial gases remains closely tied to large-scale manufacturing (LSM), which has shown mixed performance in FY25, contracting by approximately 1.21% in the first 11 months due to subdued output in key sectors like steel and fabricated metals. However, management anticipates a rebound in these sectors.

Financially, the company reported a 32.1% year-on-year revenue growth, reaching approximately Rs11.3 billon in CY24 compared to Rs8.5bn in CY23.

This growth was largely attributed to an effective pricing strategy, which supported strong margins despite elevated energy costs which constitute about 40% of PAKOXY’s cost of goods sold.

To address the energy challenge and meet future demand, PAKOXY commissioned a new 270 TPD European energy-efficient Air Separation Unit (ASU).

The upgrade in ratings also reflects the company's long-term strategic planning and investment initiatives.

The company’s capital structure remains leveraged, comprising long-term borrowings under the Temporary Economic Refinance Facility (TERF) and short-term loans for working capital needs.

Despite a slightly stretched working capital cycle, the company's coverage metrics remain adequate.

PAKOXY continues to expand its strategic footprint, including in the hydrogen segment. The company is setting up a hydrogen production facility at Port Qasim under a 15-year supply agreement with a leading specialty chemicals customer, a move expected to enhance its leadership in this emerging domain.

Governance-wise, PAKOXY benefits from a strong framework led by a ten-member Board of Directors, including six non-executive and four independent directors.

Mr. Waqar A. Malik serves as Chairman, while Mr. Matin Amjad holds the position of Chief Executive Officer. Mr. Siraj Dadabhoy is the company’s major beneficial shareholder.

Looking forward, the ratings are dependent on PAKOXY’s ability to sustain its market share, maintain profitability, and efficiently utilize its production capacity in line with its financial projections and prudent management practices.

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