Lahore, August 30, 2023 (PPI-OT): Pakistan heavily depends on imports for its energy requirements due to its limited domestic POL production. A substantial increase in POL import costs was witnessed supported by rupee depreciation (FY22: US$17bln, FY21: US$8bln); however, the demand remains stable. While, during FY23, the demand for POL products, furnace oil (FO), high-speed diesel (HSD), motor spirit (MS), and high octane blended component (HOBC) - which make up ~95% of the total sales - declined by ~15% due to macroeconomic pressures. The transportation and power sectors remain the main consumers, accounting for ~89% of total demand. Despite challenges, the sector's overall outlook - cash flows and liquidity - remains stable.
The assigned ratings incorporate Puma Energy Pakistan (Pvt.) Limited’s ('Puma' or 'the Company') established network and its strong position on the operational front. Currently, Puma operates through 542 retail pumps spread across the country with a concentration in Punjab and KPK. The ratings factor in sponsor's substantial business acumen in the OMC sector. Moreover, consistent rebranding activities under the name of Puma benefits the Company's overall performance.
This along with entering into a Trademark License Agreement (TMLA) with Puma Energy International S.A adds strength. Puma mainly generates revenue from HSD (~48%) and PMG (~54%), capturing ~1.6% market share as of Dec-22. Topline posts growing trajectory and remains considerable. Despite high input costs, business margins and in turn profitability remains intact. However, working on supplier’s credit factors in high exchange loss risk. Financial risk remains adequate supported by adequate working capital cycle and leveraging. Coverages, however, are strong. Moreover, support from the sponsors through equity injection augments the Company overall financial footing.
The rating captures the Company’s ability to sustain business operations through planned re-branding of retail sites and equity injection. Moreover, the Company's ability to enhance its capacity utilization, through infrastructure and supply chain development remains imperative. Sustaining key financial metrics, working capital ratios and/or coverages are crucial for ratings.
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