Lahore, January 10, 2018 (PPI-OT):The ratings reflect PEL’s strong business profile in its respective markets – Appliances and Power – supplemented by its strong brand. The Company, while aiming to diversify its product base, has continued to focus on improving technology in its key revenue generating products. This resulted in higher sales volumes. The performance of the Company is well supported by healthy business margins, though profits sustained given expansionary market strategy. Cashflows remained largely stable, while supporting the debt servicing ability of the company at satisfactory level.
High working capital needs emanating from long inventory and receivables cycle expose the Company to financial risk. While the management’s focused efforts provided relief. Comfort is drawn from sponsors’ support to manage these needs (former equity injection and retention of profits). Meanwhile, the Company has articulated an adequate debt management policy a) total debt would be restricted to 2.5 times of free cash flows [end-Sep17: 1.2x] and b) short-term borrowings would not exceed 50% of net working capital needs [end-Dec16: 39%].
The ratings take into account improving business dynamics in Appliances and Power segments apart from the Company’s strengthening business risk profile. Increase in market share with sustainable cash flows have benefited the ratings. Meanwhile, close monitoring of working capital requirements and debt servicing capacity remains imperative to maintain the company’s financial health; hence ratings. The Sukuk rating incorporates the management plan of keeping a sizeable cushion in its credit lines over the tenor of the instrument.
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