January 22, 2019 (MLN): Pakistan Credit Rating Agency has maintained entity ratings of Engro Polymer and Chemicals Limited at ‘AA-‘ for long-term and ‘A1+’ for short-term, with a stable outlook forecast.
The ratings recognize Engro Polymer’s established foothold in the local PVC and caustic soda market. EPCL is the only manufacturer of Poly Vinyl Chloride (PVC), having a market share of ~66% in domestic market. Growth in economy and increase in construction activities led to increase in company's revenues and further improvement in profitability.
Keeping in view growth trajectory, EPCL announced a CAPEX of PKR 10.3 billion, an addition of 100K tons capacity on PVC and 50K tons of VCM, on a tune of PKR 7.6 billion of which PKR 5.4 billion has been raised through the issuance of right shares. Remaining CAPEX will be funded through internally generated cash and debt.
EPCL further plans to invest $23 million through internal cash flow for installing Hydrogen Peroxide Plant. During expansion, the strength of the balance sheet is likely to remain intact.
The ratings are dependent upon holding sustained operations and continuity of improved margins. Successful execution of planned expansion, while, with the new debt to be acquired, maintenance of coverages would remain important to uphold ratings. Sustenance of import and anti-dumping duty is important for the sustainability of the risk profile of the company.
