Lahore, July 30, 2021 (PPI-OT): The ratings reflect eminent position of Pakistan Oxygen Limited in industrial, medical gases, healthcare solutions, hard goods and welding segment. The industry largely possesses oligopolistic structure, benefiting the players. Lately, the demand side in case of both industrial and medical gases have gained momentum when the industrial segments gradually resumed to normality post-Covid lockdown and large scale manufacturing showed some respite as well, and to capitalize LSM growth the Company has planned to enhance production capacity of electrodes with a new plant.

As it was anticipated, third wave of pandemic pushed up the medical gases consumption to its peak, eventually enabling the market players to earn more revenues including Pakistan Oxygen. The company came forward to serve the community from the forefront when the country had to face capacity limitation and turned to imports in order to combat the looming situation. Since this was a low margin based area, the company’s profitability did not reflect the incremental effect of revenues. Pakistan Oxygen serves customers across a wide spectrum of industries ranging from chemical and petrochemical to steel, food and healthcare.

The ratings take comfort from the rich heritage on account of previous ownership of international group (LINDE) with a solid name in the chemical and gases industries globally, which continues to lend support. Pakistan Oxygen, is on its way to set-up the largest and most efficient air separation unit in Pakistan sourced from Linde. Going forward, the process of expansion has expedited which was previously delayed due to COVID-19. The related modalities and funding arrangements has been finalized and will figuratively reflect in coming quarters. The incumbent sponsors have added more investments into the company which are expected to bear fruits in near future, Reversal of key economy driven challenges; interest rate, have strengthened the financial risk appetite of the Company.

The ratings are dependent on the company’s ability to effectively utilize its existing capacity and management of financial risk particularly the debt coverages, wherein any significant dilution would be imperative for the ratings. Debt-Equity mix and repayment plan for the investment would play a pivotal role in determining financial risk profile. The management is deploying a conservative expansion plan with borrowings carrying terms and conditions that the company can conveniently manage. The entity has been ably catering to a market more than its production capacity. Maintaining strong coverages and sustained market share with better profitability will remain vital.

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