PACRA maintains the rating of Engro Polymer and Chemicals Limited – Sukuk – Jan 19

Lahore, July 18, 2022 (PPI-OT): Engro Polymer and Chemicals Limited (“EPCL” or “The Company”) ratings reflect an established foothold in the manufacturing of Poly Vinyl Chloride (PVC) resin, and Chlor Alkali products (Caustic Soda, Sodium Hypochlorite, and HCL). EPCL is the sole manufacturer of PVC resin in the domestic market. During 1HCY21, EPCL successfully completed its 100KTA PVC plant-3 project along with the 50KTA VCM plant debottlenecking project. The combined capacity of PVC plants now stands at 295KTA. During CY21 the Company claimed to dominate the local market share in PVC resin as compared to CY20.

The Company’s topline grew by ~98% in CY21 owing to an increase in sales volume followed by higher PVC prices which translated into the highest ever profitability. It is anticipated that PVC resin demand will remain strong due to ongoing infrastructure and modernization projects. The Company en-routes another efficiency/expansion projects which include; Hydrogen peroxide production and High-Temperature direct Chlorination. Currently, the Company’s debt profile is elevated amidst its phases of expansion, though, it is being aptly managed by having concessionary loans (TERF).

The KIBOR has increased up to 15%, further elevating the debt service cost in the future as long-term borrowings dominate the total borrowings. A forex risk arising from the foreign currency loan on the company’s books has been neutralized through a synthetic hedge transaction that EPCL entered into 2020. The Company enjoys a very strong liquidity position on the back of sizable deposits and liquid assets, supplementing its cashflows. EPCL’s association with one of the country’s leading conglomerates – Engro Corp – lend further support to the ratings.

The ratings are dependent upon the company’s ability to sustain its position as a market leader and maintain sufficient margins and profitability with prudent financial discipline. Timely completion of the remaining planned expansion projects, while retaining stable coverages would remain important. Adequate management of its capital structure and debt payback remains imperative.

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