PACRA Maintains Entity Ratings of Engro Polymer & Chemicals Limited
The ratings recognize Engro Polymer’s established foothold in the local PVC and caustic soda market. EPCL is the only manufacturer of Poly Vinyl Chloride (PVC), having a market share of ~66% in domestic market. Growth of PVC demand in domestic market and improved vinyl chain dynamics lead to higher revenues and improved profitability. Keeping in view growth trajectory, EPCL announced a CAPEX of PKR 10.3bln, an addition of 100K tons capacity on PVC and 50K tons of VCM. The Company raised on a tune of PKR 7.6bln of which PKR 5.4bln has been raised through the issuance of right shares. Remaining CAPEX will be funded through internally generated cash and debt. EPCL further plans to enter Hydrogen Per Oxide business through a green field manufacturing facility by investing US$ 23mln. During expansion, the strength of the balance sheet is likely to remain intact. The ratings also reflect EPCL's association with one of the country's leading conglomerate – Engro Corp. Also, the cost of expansion (imported component) will rise due to Rupee devaluation. However, this impact is curtailed to an extent through hedging.
The ratings are dependent upon holding sustained operations and margins. Successful and timely execution of expansion projects within stipulated time frame and cost parameters, maintenance of coverages would remain important to uphold ratings. Maintenance of strong financial profile and coverages is important.
EPCL, established in 1997, started commercial production in 1999. The Company is listed on Pakistan Stock Exchange. EPCL is primarily involved in the manufacturing, marketing and distribution of PVC and its allied products with design annual capacity of 195,000 tons per annum (tpa). Caustic Soda – another product - adds meaningful diversification to the company’s business. EPCL markets the PVC products with the brand name of ‘SABZ'.
EPCL is a subsidiary of Engro Corporation Limited (ECL) having majority stake of 56%. The other major shareholders of EPCL are Mitsubishi Corporation (11%), and others (~33%). The Board of Directors (BoD) comprises 7 members including CEO. Four Board members are from the parent while one member represents Mitsubishi Corporation. There is one independent director. Mr. Ghiasuddin Khan – the CEO of Engro Corp - is Non-Executive Chairman of EPCL. Mr. Imran Anwer, the CEO of the EPCL, is associated with Engro since 2005. He is a seasoned professional with over two decades of experience.