PACRA Upgrades the Entity Ratings of Pakistan Oxygen Limited

The ratings reflect the eminent position of Pakistan Oxygen Limited (“the Company” or “POL”) in the industrial & medical gases, welding, hard goods, and Medical Engineering Services (MES) segments. The Company maintains a leading footprint and broad customer outreach within Pakistan’s structured industrial and medical gases industry. In the electrodes segment, POL leads the Tier-I category while also maintaining a notable presence in the largely unorganized Tier-II and Tier-III markets. On the domestic front, total ASU production capacity stands around 1,500 TPD. The sector remains organized and concentrated, with Pakistan Oxygen Limited being one of the key players driving production capacity and market leadership. The demand for medical gases is intrinsically linked to improvements in healthcare infrastructure. This sector is currently benefiting from rapid urbanization and a general increase in health awareness. While, the demand for industrial gases is closely tied to the output of large-scale manufacturing (LSM). Despite favorable macroeconomic conditions in FY25, including exchange rate stability, a gradual decline in inflation, and policy rates, LSM showed mixed trends, contracting by ~1.21% in 11MFY25. While certain segments, such as garments, automobiles, textiles, petroleum products, tobacco, and pharmaceuticals, witnessed selective improvements, the broader LSM index was negatively impacted by reduced production in key industrial gas-consuming sectors like steel, fabricated metal, machinery, and electrical equipment. However, the management expects recovery in these segments in future. During CY24, the Company reported revenue of ~PKR 11.3bln, reflecting a growth of 32.1% compared to ~PKR 8.5bln in CY23. This increase was primarily driven by an effective pricing strategy, which translated into healthy margins across all levels. Energy costs constitute ~40% of the Company’s cost of goods sold (COGS), making elevated energy prices a continued challenge for the industry. In response, the Company commissioned a state-of-the-art European energy-efficient 270 TPD Air Separation Unit (ASU) to support future demand in the industrial and medical gases segments. The rating upgrade reflects a notable improvement in the profitability profile and growth trajectory, which are expected to be sustained, as evidenced by POL’s financial projections. POL benefits from a strong governance framework, supported by a skilled and experienced management team. The Company’s financial risk profile reflects a slightly stretched working capital cycle, though coverage metrics remain adequate. The capital structure is leveraged, primarily comprising long-term borrowings (TERF) undertaken to support capacity expansion BMR initiatives and short-term for working capital management. Going forward, POL is investing in expanding its hydrogen production by establishing a new hydrogen production facility at Port Qasim. The project is backed by a 15-year supply agreement with a leading specialty chemicals customer, further strengthening POL’s position in the hydrogen segment.
The ratings are dependent on the Company's ability to sustain its market share by effectively utilizing its production capacity. At the same time, sustainability in the growth trajectory and profitability matrix, along with prudent financial management and performance outlined in the latest projections will remain imperative.

About the Entity
Pakistan Oxygen Limited, established in 1949 and publicly listed on the Pakistan Stock Exchange in 1958, is a prominent entity in the manufacturing of industrial and medical gases, welding electrodes, and the marketing of medical equipment. The Company operates across four key business segments: bulk gases, healthcare, packaged gas products (PGP), and tonnage. Mr. Siraj Dadabhoy is identified as the major beneficial shareholder. The Company's governance is overseen by a ten-member Board of Directors, which includes six non-executive directors and four independent directors. Mr. Waqar A. Malik serves as the Chairman of the Board, while Mr. Matin Amjad holds the position of Chief Executive Officer.