July 1, 2019 (MLN): Pakistan Credit Rating Agency has maintained entity ratings of Engro Corporation Limited at ‘AA+’ for long-term and ‘A1+’ for short-term. Outlook on the assigned ratings is ‘stable’.
The ratings reflect Engro Corporation's established position as a conglomerate with a diverse pool of investments under four verticals: food and agriculture, petrochemicals, energy and related infrastructure, and telecommunication infrastructure.
Respective businesses under the Umbrella of the Holding company exhibit their strength through continued growth trajectory in CY18 despite a challenging economic environment.
Engro Fertilizer, being the second largest in the fertilizer sector, increased its market share in CY18 and is expected to remain stable.
Engro Polymer and Chemical has a fortified position in the local PVC industry with capacity enhancements in progress and new Hydrogen per Oxide project on the cards. The sizeable investments in the energy chain, through Engro Energy have progressed in a timely manner and are expected to come online in July, 2019.
Engro Corp is operating at a modest leverage signifying low financial risk. Its strategy to limit debt levels to fifty percent of its equity (excluding sovereign linked debt) at group level gives comfort to ratings. The ratings factor in HoldCo's organizational structure, designed to control the strategic direction of its subsidiaries, and strong governance framework.
The ratings are dependent on the management's ability to execute its envisaged strategy of growth and expansion. Sustainability in the performance of subsidiaries with effective management of financial profile to continue as stable dividend producing entities for the group remains critical. Meanwhile, effective utilization of liquid assets to enhance investment portfolio is important.
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