Lahore, August 24, 2020 (PPI-OT): The ratings reflect adequate profile of Awan Trading Company characterized by mediocre market share in imported coal, especially retail market. The Company imports majority of its raw material, where currency fluctuations and pricing risk effect margins. The management intends to pass on the impact onto customers, though demand sensitivity is a consideration. The company has arrangements regarding supply of coal with various suppliers globally. Awan Trading Company follows strategy of keeping some inventory in stock which is stored in rented/custom bonded warehouses.
Over the last few years, the company has improved its business and financial profile; however, amidst the COVID-19 outbreak, business profile is facing challenge in terms of low demand resulting into a decline in volume metric growth, margins and profits. In this respect, the recent favourable decision about the taxation regime would support the company in coming. The Awan Group caters to the coal demand of the corporates through another entity as well as having profitable operations. The financial risk profile is adequate. The company has sizable lines (funded and un-funded) available from different banks to cater to supplier demand utilization level as reflective of weak business performance remained moderate.
Going forward, management’s attention on sustainable customer base in addition to improving sales and margins is imperative. Any prolonged deterioration in revenues and/or coverages will impact the ratings. The rating watch captures these imperatives and the company’s resolve to steer through these would settle the watch in the foreseeable future.
For more information, contact:
Analyst,
The Pakistan Credit Rating Agency Limited (PACRA)
Awami Complex, FB1, Usman Block New Garden Town,
Lahore, Pakistan
Tel: +92-42-5869504-6
Fax: +92-42-5830425
Email: hammad.rashid@pacra.com
Website: www.pacra.com