Lahore, August 27, 2021 (PPI-OT):Welcon Chemicals (Pvt.) Limited (herein referred to as ‘Welcon’ or ‘the Company’) operates in three segments, namely: i) Pesticides ii) Seeds and iii) Fertilizer, through its dealer and distribution network. With time, it has expanded operations by entering into different businesses in the agriculture industry and achieving operational efficiency. The Company is part of one of the pioneer groups of the industry. After incorporation in 1995, the Company has been able to cement its position as a major market player in the sector. Welcon has reported adequate turnover, with ample contribution of each segment.
However, pesticide remains the predominant segment in terms of revenue. Profitability of the Company, in terms of margins, is lower to the other prominent market participants. The Company’s plant is located at Jhanian, near the home market (Multan), which has a positive impact on the cost structure. To enhance foot print in the market, the group’s R and D performs research and tests frequently. The customers are engaged by arranging gatherings in far flung areas, to address the farmers’ concerns. The Company meets its working capital requirements through a mix of internal cashflows and short-term borrowings.
However, the financial risk remains under control on account of low long-term finance and adequate coverages. Supply mechanism of raw material, predominantly from China, was under pressure, in the wake of the global COVID-19 pandemic. Subsequent to the ease in lockdown restrictions, such constraints have subsided. The ratings take comfort from the sponsor strength, with AllahDin Group having interests in various segments of the agriculture industry, spanning more than two decades. Having a diversified product mix bodes well for the Company and the group, in the wake of an ever-changing industry. The ratings also take into account the superior quality of the production process and notable production capacity of the Company. Going forward, the improvement in bottom-line and cash flows, standardization in governance structure and financial transparency is vital.
The ratings are dependent on improvement in business and financial profile of the Company. Any deterioration to topline, margins or cash flows remain critical to the ratings. The company’s sustained business performance in the currently stretched economic scenario, amid COVID-19 remains vital to the ratings.
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Analyst,
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