Lahore, July 02, 2021 (PPI-OT):The ratings recognize Descon Oxychem’s leading position in the local Hydrogen Peroxide (HPO) market, supplemented by efficient production processes, sound technological infrastructure and effective control environment. One of the only two manufacturers in Pakistan’s market, Descon Oxychem has gradually strengthened its footprint; particularly in the North region. After COVID-19 outbreak and subsequent lockdown, HPO prices have gone down due to lower demand, especially from the textile sector. Demand from textile has then revived on account of eventual easing of lockdown and resumption of operations.
The Company managed to sustain its revenue during these challenging times through product diversification. The Company has introduced multipurpose disinfectant / sanitizer products to support its business profile. The Company has successfully completed its expansion project with increase of 25% capacity and plant has achieved new designed capacity in Feb21. Meanwhile, the financial risk profile remains strong characterized by efficient working capital management and strong coverages. The Company has obtained long term loan for expansion project and leveraging has gone up but yet manageable. Ratings further draw comfort from Descon Oxychem’s association with a financially sound and experienced business group – DESCON – which has continuously demonstrated support.
The ratings are dependent on improved competitiveness of the Company through product diversification to mitigate slowdown in demand. Timely translation of the expansion plan into better profitability would positively impact the ratings. Meanwhile, smooth operations from the current plant would remain important. Maintaining strong coverages and sustainable leveraging will remain critical.
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