Press Release
VIS Assigns Initial Entity Ratings to Zoom Petroleum (Pvt) Limited
Karachi, June 07, 2021: VIS Credit Rating Company Limited (VIS) has assigned initial entity ratings of ‘BBB-/A-3’ (Triple B Minus/A-Three) to Zoom Petroleum (Pvt.) Limited (ZPPL). The medium to long term rating of ‘BBB-’ signifies adequate credit quality. Protection factors are reasonable and sufficient while risk factors are considered variable if changes occur in the economy. The short term rating of ‘A-3’ indicates satisfactory liquidity and other protection factors that qualify entities/issues as investment grade. Outlook on the assigned ratings is ‘Stable’.
The ratings assigned to ZPPL take into account the company’s presence in petroleum industry along with reasonable experience of the group and the management team in the relevant sector. Ratings reflect weakening in industry dynamics owing to sizable price volatility in controlled price regime with thin margins. This coupled with ZPPL’s import based model leads to increased market/exchange risk; the business risk profile of the company is thus elevated. Ratings factor in weak financial risk profile during COVID reflected by depressed margins and profitability indicators resulting in weakening of liquidity position as evident from negative coverages during FY20.
The ongoing year marked improvement in the operational performance of the company supported by positive momentum in earnings, improved margins and rescued profitability and liquidity metrics; continuity of same would be seen over time in the competitive market. Given the low market share and commensurate investment requirement reliance on long-term debt is low, however, with the scaling up of operations this would increase in relations to growth. However, debt leverage remains on a higher side owing to substantial payables and short-term funding present. Key risk to performance going forward is dependent upon the uncertainty from successive waves of the corona virus pandemic and its mitigation by the extent of vaccine roll out. The ratings are dependent on industry’s performance, improvement of company’s market position with related investment in storage and allied facilities, maintenance of margins and leverage indicators coupled with realization of projected targets and evolution of sector dynamics post ongoing pandemic.
For further information on this rating announcement, please contact Ms. Maham Qasim (042-35723411-13, Ext. 8010) and/or the undersigned at 021-35311861-66 or email at info@vis.com.pk
Javed Callea
Advisor
Applicable rating criterion: Corporates (May 2019)
https://www.vis.com.pk/kc-meth.aspx