Pakistan Credit Rating Agency maintains Entity Ratings of Descon Oxychem Limited

Lahore, November 02, 2012 (PPI-OT): The Pakistan Credit Rating Agency (PACRA) has maintained the long-term and the short-term entity ratings of Descon Oxychem Limited (DOL) at “A” (Single A) and “A2″ (A Two), respectively. These ratings denote a low expectation of credit risk emanating from a strong capacity for timely payment of financial commitments.

The ratings primarily incorporate DOL’s association with a financially sound and astute business group – Descon – which in the past has demonstrated support.

The ratings reflect the company’s strong position in the domestic Hydrogen Peroxide industry, emanating from quality production process, sound technological infrastructure and effective control environment. Lately, the company’s performance has been inflicted despite healthy volumes owing to contracted margins and high finance cost.

The recent uptick in the product prices, favourable PKR-Dollar parity and interest rate rationalization is expected to benefit the company’s profitability. DOL’s financial profile is constrained owing to modest core cash flows, in turn, stressed coverages.

Nevertheless, given liquid nature of its investment book, the company can meet its financial commitments through divesture of these investments. The ratings are dependent on the management’s ability to execute its business strategy aimed at achieving cost efficiency while ensuring sustained demand.

Meanwhile, any further deterioration in the overall business dynamics adversely impacting the company’s viability would be critical for the ratings.

For more information, contact:
Hammad Rashid
Analyst
The Pakistan Credit Rating Agency Limited (PACRA)
Awami Complex, FB1, Usman Block New Garden Town,
Lahore – Pakistan
Tel: +9242 586 9504 -6
Fax: +9242 583 0425
Email: hammad.rashid@pacra.com
Web: www.pacra.com

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