Lahore, January 26, 2018 (PPI-OT):The ratings reflect IFL’s (i) robust ownership profile (Ibrahim group) that has demonstrated strong support, (ii) leading market position in the local polyester staple fibre (PSF) industry, and (iii) intentions to keep leveraging at low levels. Imposition of anti-dumping duty on PSF imported from China since Feb-16 has supported volumetric growth and margin – performance has also gained from by increasing demand.
Favourable movements in crude oil prices, and, PSF feedstock prices, provided further benefit to the company’s core margins. Given demand pattern and efficient production, IFL is expected to hold performance trend. In recent years, the company’s bottom-line has been a function of a reliable dividend stream of IFL’s investment in Allied Bank Limited (ABL), an associated company. Lately, the said investment has been sold to group holding company. Though the recurring stream of income from ABL would stop, the resulting cash flows are primarily being used to adjust debt levels. In turn, significant financial cost savings. Meanwhile improved core profitability would bode well for its financial profile.
The ratings are dependent on profitable operation of the company, supported by input prices and duty protection. Moreover, association with Ibrahim Group bodes well for the company. Going forward, induction of independent board members should benefit governance framework.
In order to formalize its corporate structure, sponsors of Ibrahim Group established a holding company – Ibrahim Holdings (Private) Limited (IHL). The new structure envisages consolidation of investments in IFL and ABL at holdco level, thus changing ownership and investment structure of investee companies. ABL’s ownership has been restructured as per plan, with IFL’s investment of ~PKR 14bln (at end-Sep16) in the company completely transferred to IHL. Restructuring of the group’s investment in IFL (currently via individuals) will follow. Nevertheless, sponsors remain committed to support IFL if need arises; the holdco structure should provide a convenient mechanism.
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
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