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The Pakistan Credit Rating Agency Limited
Press Release

Date
27-May-24

Analyst
Kanwal Ejaz
kanwal.ejaz@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 Upgrades Entity Ratings of Olympia Chemicals Limited

Rating Type Entity
Current
(27-May-24 )
Previous
(20-Jun-23 )
Action Upgrade Maintain
Long Term A A-
Short Term A1 A1
Outlook Stable Stable
Rating Watch - -

Olympia Chemicals Limited (the Company) ratings reflect a vigorous business profile represented by its prominent position in manufacturing of Soda Ash light/dense (Sodium Carbonate) and Refined Sodium Bicarbonate. The Company’s expansion of Soda ash unit with 250TPD has been recently completed, and now the current capacity stands at 1000TPD including 160TPD of Sodium Bi Carbonate. As part of its diversification strategy, the company ventured into the value-added segment of soda ash, and targeted the detergent markets, however, the contribution from this segment is currently modest. Currently, the local market exhibits a duopoly, with Lucky Core Industries holding a commanding ~60% market share, followed by Olympia Chemicals with approximately ~30% market share, while the remaining 10% is supplied through imports. A prominent, local business group has also got approval from the Special Economic Zone (SEZ) to set up a new soda ash manufacturing plant expected to come online within next two years. The demand for Soda Ash is closely linked with the performance of the construction/glass industries, and prevailing macroeconomic factors, such as elevated inflation, high interest rates, and currency devaluation can dampen local demand. Nonetheless, there exists an opportunity for exports to capitalize on existing production capacities, providing a potential avenue for industry growth despite domestic challenges. The topline of the company registered a positive growth of ~13% during 9MFY24 mainly due to an increase in volumes. However, margins posted a slight decline, due to cost-push inflation and soaring borrowing costs. The company follows a comprehensive and prudent business plan, and the company’s performance is aligned with it which adds comfort to the ratings. The group has a formidable business history, and its portfolio contains investments in the poultry sector & processed chicken, feeds, chemical manufacturing, edible oils extraction, agriculture crops, fruit orchards, carpets weaving, and textile products. Some of the renowned brands are “Areej Banaspati & Cooking Oil” and “Olympia Carpets” etc. Operations are managed by a team of professionals, under the supervision of sponsors. The board of the company is family-oriented where sponsors are close family members thus indicating room for improvement. The Company is benefitting from sound systems of internal controls. The financial profile of the Company is considered good with comfortable coverages, cashflows, and working capital management. Capital structure is moderately leveraged, and borrowings are mainly comprised of concessionary long-term loans (TERF). Going forward the company is expecting to increase its export sales to UAE, Qatar, KSA, South Africa, Afghanistan, Bangladesh, and Kuwait.
The ratings are dependent on upheld sustainable profits and market share while retaining sufficient cash flows and coverages. However, adherence to maintaining its debt metrics at an adequate level is a prerequisite

About the Entity
Olympia Chemicals Limited (the company) was incorporated in Pakistan on January 01, 1995, as a public unlisted under the Companies Ordinance,1984 (now the Companies Act, 2017). The registered office of the company is situated at 25-A Davis Road, Lahore, and manufacturing facilities are located at Unit (I) Warcha Tehsil Quaidabad, District Khushab Warcha and Unit (II) 45-KM Multan Road, Tehsil Pattoki, District Kasur. The Company is owned by the Monnoo family and its shareholding is divided among the family of Mr. Hamayun Monnoo (25%) , Muhammad Shakil Monnoo and his family (36%) and Muhammad Khurshid Monnoo and his family (19.33%) and Muhammad Nasir Monnoo and his family (19.33%). Muhammad Shakil Monnoo is the 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.