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The Pakistan Credit Rating Agency Limited
Press Release

Date
26-Jun-20

Analyst
Faiqa Qamar
faiqa.qamar@pacra.com
+92-42-35869504
www.pacra.com

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This press release is being transmitted for the sole purpose of dissemination through print/electronic media. The press release may be used in full or in part without changing the meaning or context thereof with due credit to PACRA

PACRA Maintains Entity Ratings of Engro Corporation Limited

Rating Type Entity
Current
(26-Jun-20)
Previous
(27-Dec-19)
Action Maintain Maintain
Long Term AA+ AA+
Short Term A1+ A1+
Outlook Stable Stable
Rating Watch - -

The ratings reflect Engro Corporation Limited's ('Engro Corp' or " the Company") very strong risk profile and exceptional liquidity. The ratings incorporate established position of the Company as a conglomerate with a diverse pool of investments under four verticals: i) food and agriculture, ii) petrochemicals, iii) energy and related infrastructure, and iv) telecommunication infrastructure. Engro Corp's various investments in diversified sectors exhibit strong performance and profitability.

Respective businesses under the umbrella of the HoldCo continued growth trajectory despite challenging economic environment and recent COVID-19 outbreak, exhibiting resiliency and strength of HoldCo's investment philosophy. Engro Fertilizer ('Efert'), being the second largest in the fertilizer sector, increased it's market share and is expected to retain its revenues. Engro Polymer and Chemical ('Epolymer') has a fortified position in the local PVC industry with capacity enhancements in progress and new Hydrogen Per Oxide project on the cards. Epolymer will benefit from resumption of operations and recently announce construction package. The sizeable investments in the energy chain, through Engro Energy, have progressed in a timely manner. EFert and Engro Elengy Terminal announced higher dividends compensating for no dividend from FrieslandCampina Engro. Epolymer and EVopak continued remained cash producers, albeit relatively low. However, due to COVID-19 and its impact of overall economic environment, Engro Corp's profitability may remain low during CY20. The Company has a low leveraged capital structure with very strong coverages and liquidity signifying its robust financial profile. It's ability to limit debt levels to fifty percent of its equity (excluding sovereign linked debt) at group level provides comfort to ratings. The ratings factor in HoldCo's strong organizational structure, designed to control the strategic direction of its subsidiaries, and strong governance framework.
The ratings are dependent on the management's ability to execute its envisaged strategy of growth and expansion amidst prevailing tough environment. Sustainability in the performance of subsidiaries, stable dividends and effective management of financial profile is importnat. Meanwhile, effective utilization of liquid assets to enhance investment portfolio is critical.

About the Entity
Engro Corporation Limited ('Engro Corp' or " the Company") is a public listed company. The principal activity of the Company is to manage investments in subsidiaries, associates and joint ventures. Dawood family holds around 46% stake in Engro Corp, majority of which is through its corporates, whereas ~2% stake is owned through individuals of Dawood family. Mr. Hussain Dawood chairs the Board of Directors, whereas Mr. Ghias Khan is the President and CEO of the Company.

The primary function of PACRA is to evaluate the capacity and willingness of an entity to honor its obligations. Our ratings reflect an independent, professional and impartial assessment of the risks associated with a particular instrument or an entity. PACRA's comprehensive offerings include instrument and entity credit ratings, insurer financial strength ratings, fund ratings, asset manager ratings and real estate gradings. PACRA opinion is not a recommendation to purchase, sell or hold a security, in as much as it does not comment on the security's market price or suitability for a particular investor.