Lahore, July 12, 2019 (PPI-OT): The rating reflect the strength of the security structure of the sukuk. This entails in-built advance cushion against the upcoming repayments. The rating reflect strong positioning of Pharmagen Limited in its respective market. The pharmaceutical industry has witnessed a high rate of sustained growth over the years. Cost-efficiencies as well as demand in-elasticity are benefiting the industry players. The new CPI-linked pricing criteria has allowed an increase in prices with respect to inflation, indicating a positive sign.
The company imports majority of its raw material, where currency fluctuation and pricing risk could affect margins, however majority of the cost increase can be passed through to its customers. Pharmagen has improved its working capital position by obtaining additional financing facilities – as a result there has been a marked improvement in profitability and turnover during the March 2019 quarter. Predominant proportion of the business is signed with eminent pharmaceutical corporates – both multinational and local.
The company’s ongoing supply arrangements with GSK and prospects of enhancing the range of products to be supplied will add-on to the growth levels. Pharmagen is poised to derive benefits from downward integration in Moringa Pharmaceuticals which would help Pharmagen, to diversify in different segments and reduce the concentration risk. The underway capacity enhancement plans are set to further boost Pharmagen’s operations and financial results. Long association of experienced management team adds comfort. The proceeds from the sukuk will be utilized in improving the composition of the debt book.
The ratings are dependent on the company’s ability to sustain margins. Improvement in business volume and profitability will be viewed positively. Meanwhile, management of debt (current and planned), thereby impacting coverages, is considered important. Furthermore, external factors such as any adverse changes in the regulatory framework and weakening of financial profile owing to delays in cash flow receipts, may impact the ratings.
For more information, contact:
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