PACRA Assigns Preliminary Rating to Engro Polymer and Chemicals Limited

Lahore, October 09, 2018 (PPI-OT): The rating recognizes 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 ~67% 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 10.3bln, an addition of 100K tons capacity on PVC and 50K tons of VCM, on a tune of PKR 7.6bln of which PKR 5.4bln 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 $23mln through internal cashflow for installing Hydrogen Peroxide Plant. During expansion, the strength of the balance sheet is likely to remain intact. The ratings also reflect EPCL’s association with one of the country’s leading conglomerate – Engro Corp. EPCL plans to utilize proceeds of this sukuk to reprofile its existing debt which will further strengthen its financial profile. The company intends to maintain a Debt Service Reserve Account during tenor of the Sukuk.

The rating is 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. Timely build up of Debt Service Reserve Account for payment of financial obligations will remain critical.

For more information, contact:
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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