Karachi: Engro Polymer and Chemicals Limited (EPCL), a key player in Pakistan's chemical sector, has retained its entity ratings as per the latest assessment by The Pakistan Credit Rating Agency Limited (PACRA). Despite facing a challenging global PVC market, EPCL has managed to maintain its market leadership.

EPCL, as Pakistan's only domestic manufacturer of Poly Vinyl Chloride (PVC) resin, also produces Chlor-Alkali products. The company has navigated recent industry turbulence, marked by a global oversupply and price reversion to pre-pandemic levels, through strategic capacity expansions and technological enhancements.

The company completed significant projects like the High-Temperature Direct Chlorination process and digital upgrades to its EDC and VCM plants. These efforts, finalized in CY24 and early CY25, have bolstered EPCL's operational framework amid volatile ethylene prices and compressed profit margins.

Domestically, Pakistan's PVC demand was subdued in CY24 due to high inflation and interest rates, impacting construction activities. However, economic conditions are improving with stabilizing foreign exchange, declining inflation, and interest rates, which are expected to revive the real estate and construction sectors.

EPCL sustained a 90% market share despite a 7% revenue dip in CY24, attributed to lower PVC prices. To counteract economic pressures, the company is enhancing PVC export volumes and exploring downstream applications through its subsidiary, Think PVC (Pvt.) Limited.

The commissioning of a Hydrogen Peroxide plant in early CY25 signifies a pivotal diversification move, poised to broaden EPCL's product range and revenue base. The company's debt levels rose in alignment with its diversification pursuits but are managed through a strategic mix of financing options.

The recent policy rate cut to 11% is anticipated to alleviate debt servicing costs, though working capital cycle elongation and reduced coverage ratios were noted last year.

EPCL's ratings benefit from its affiliation with Engro Corporation, a major conglomerate in Pakistan, which provides financial strength and stability. Maintaining leadership, expanding sales through exports, and adhering to financial discipline remain crucial for sustaining its ratings and future profitability.