March 4, 2021: Pakistan Credit Rating Agency (PACRA) has upgraded entity ratings of Pakistan International Bulk Terminal Limited (PIBT) from A- to A for the Long-term while it maintained ratings at A2 for short-term.
The ratings draw comfort from sponsors' extensive association with the related business “Marine Group of Companies”. The Pakistan International Bulk Terminal Limited (PIBT) has secured a distinguished position in its operating segment due to its strategic importance in the Power and Cement sector.
The company operates on a “build, operate and transfer” (BOT) model at Port Qasim Authority for the provision of terminal handling services for Coal, Clinker, and Cement for a period of 30 years. Major demand vests in the domestic cement landscape followed by power producers that are dependent on imported coal for their operations.
With a fully automated infrastructure, the company's annual capacity hovers around 12 million MT for inbound coal handling and 4 million MT of outbound clinker and cement handling. Since reduced competition in the market because of suspension of coal handling at KPT boded well for the company causing a significant enhancement in its business volumes.
PIBT handled 8.6mln tons of coal cargo in FY20 (FY19 8.5mln tons, FY18 2.7mln tons) depicting improved performance. Changing demand dynamics for imported coal as the government's initiatives towards indigenous coal-based power plants and re-instigated competition are, however, critical for the ratings.
Company's performance during FY20 exhibited strong performance by improving revenue, gross profit, EBITDA and achieving a positive figure in Bottom line i.e. ~PKR 1.1bln (FY19: loss of (2.4bln). The dollar-based tariff structure provides an inbuilt hedge against foreign obligations. The capital structure remains comfortable despite hefty long-term borrowings, duly cushioned by equity enhancements on a timely basis. The result of pending litigation will be crucial for the business.
The ratings are dependent upon upholding of strong business profile amidst unforeseen changes in the competitive landscape, company’s ability to improve its margins and profitability. Optimal utilization of the capacity and improvement in margins is considered important. Self-sufficiency in meeting debt obligations is the key factor, which may be supplemented by extended support if needed.