Pakistan Cables assigned initial entity ratings of 'A/A-1' by JCR-VIS

JCR-VIS Credit Rating Company Limited (JCR-VIS) assigned initial entity ratings of ‘A/A-1’ (Single A /A-One) to Pakistan Cables Limited (PCL) on Tuesday, 4th September. Outlook on the assigned ratings is ‘Stable’.

According to the rating agency, the assigned ratings incorporates PCL’s position as the leading wire and cable manufacturer in the country and strong brand strength and reputation as a provider of quality cables.

The rating also incorporates the business risk profile of the firm, which is underpinned by growing demand for wires & cables and extensive experience and track record of the management team.

Overall corporate governance framework is supported by sound board oversight, stable and professional management team and focuses mainly on transparency and disclosures.

The wiring & cable industry is characterized by significant competition with existence of several large players and numerous small unorganized firms. Business risk profile is supported by stable and growing demand for wires & cables in the country from housing, energy, automotive, construction and other segments.

However, the rating agency warned that, “business to business segment is exposed to competition from Chinese imports while retail sales face competition from informal manufacturers operating domestically”.

PCL posted improvement in profitability during FY17 on account of growth in sales, lower effective tax rate and one-time reversals. Liquidity profile draws support from adequate cash flows in relation to outstanding obligations.

Moreover, the debt profile of PCL is largely short-term in nature while leverage indicators have remained within manageable limits, says the rating agency.

The Company is in the process of expansion of manufacturing facilities which will enhance production capacity and further augment cash flows. Right shares for planned expansion were announced with proceeds realized in July’2018.