PACRA Assigns Entity Ratings to Premier Industrial Chemical MFG. Co. (Pvt.) Limited

Pakistan’s ethanol industry is largely export-based owing to meager domestic consumption. The Country’s ethanol exports stood at 353,936 MT in MY21 (MY20: 229,639 MT), witnessing ~54% increase. Prices in the global market have been high, on the back of spike in ethanol demand, despite unsteady economic conditions worldwide. Impact of high international ethanol prices was supplemented by devaluation of the Pakistani Rupee. Sugarcane production in Pakistan during MY21 improved, as domestic distilleries posted stable profits. During the ongoing MY22, the industry's margin are expected to remain stable owing to increased ethanol prices, though raw material prices have also increased from high cost of molasses.
The ratings reflect Premier Industrial Chemical MFG. Co. (Pvt.) Limited's ('the Company') prominent position in the country's ethanol export segment emanating from its substantial capacity. The Company's performance has remained adequately stable over the years supplemented by high margins, and profitability which bodes well for the ratings. Lately, the Company's lower capacity utilization due to lower availability of molasses impacted the financial performance. The Company procures molasses entirely from the domestic market. This exposes the Company to inherent procurement risk. Despite the challenge in this regard, the management achieved improved utilization and increase in profits during the ongoing season and anticipates to do so in subsequent years. The ratings also draw strength from the Company’s association with group entities operating in the paper segment. The Company’s revenue comprises primarily of ethanol exports and local sales of juices and flavored milk. The Company has a moderately leveraged capital structure supplemented by strong coverages and effective working capital management. The Company has a very strong equity base. Furthermore, the materialization of the Company's expansionary measures which are pre-dominantly funded through equity remains fundamental for the ratings. The sponsors' willingness to support the Company bodes well for the ratings.
Ratings are dependent on the management’s ability to effectively sustain the improved volumes and margins. Prudent debt and liquidity management is critical for ratings. Any deterioration in coverages and/or drag of high advances extended to group concerns, if any, will adversely impact the ratings. Meanwhile, strengthening governance framework remains imperative for ratings.

About the Entity
Premier Industrial Chemical Manufacturing Co. (Private) Limited (‘the Company’) was incorporated in Jun-03 as a private limited company. The Company is primarily engaged in the manufacturing and sale of food grade ethanol, dairy products, and juices. Total annual production capacity is 120,000 M. Tons with Superfine Ethanol of 96% strength and Fuel grade Ethanol of 99.9% strength comprising of 50,000MT each. The Company is completely owned by the sponsoring family. Mr. Muhammad Saeed, the Chief Executive Officer and Chairman of the Board, and has been associated with the Company since inception. Director, Mr. Shahid Saeed, heads the Company’s dairy and juices segment.