Press Release

VIS Reaffirms Entity Ratings of Zoom Petroleum (Pvt.) Limited

Karachi, February 28, 2024: VIS Credit Rating Company Limited (‘VIS’) has reaffirmed entity ratings of Zoom Petroleum (Pvt.) Limited (‘ZPPL’ or ‘the Company’) at 'BBB-/A-3' (‘Triple B minus’/’A-Three’). Medium to long term rating of 'BBB-' indicates adequate credit quality; protection factors are reasonable and sufficient. Risk factors are considered variable if changes occur in the economy. Short term rating of 'A-3' indicates satisfactory liquidity and other protection factors qualify entities as to investment grade. Risk factors are larger and subject to more variation. Nevertheless, timely payment is expected. Outlook on the assigned ratings is ‘Stable’. Previous rating action was announced on December 12, 2022.

ZPPL is an Oil Marketing Company (OMC), primarily involved in sales and marketing of High Speed Diesel (HSD) and Premier Motor Gasoline (PMG). The Company has cumulative storage capacity of 1,795 MT in Kasur and Gujranwala and a retail presence of 43 outlets in major cities of Punjab.

Assigned ratings incorporate the heightened business risk profile of ZPPL, characterized by its susceptibility to macroeconomic conditions and exposure to foreign exchange fluctuations. The decline in Pakistan's petroleum product sales, attributed to sluggish industrial activity, reduced local transport fuel consumption, weak auto sales, and high product prices, has contributed to a challenging environment. The scarcity of foreign exchange for importing raw materials and currency devaluation further impacted the industry, leading to a significant reduction in petroleum product consumption.

Assessment of financial profile reflects significant decline in volumes, particularly in MOGAS and HSD. Despite some offset from price increases, the decline in volumes persisted, attributed by slowdown in demand for petroleum products due to higher prices, a sluggish auto sector, and decreased industrial activity. Pressure on volume sales has continued in the ongoing year.
Margins, in the ongoing year, depict improvement, driven by an increase in OMC margins set by the Government. However, higher financial charges continue to exert pressure. The shift towards purchasing from local refineries has reduced lead times and foreign currency exposure, which is expected to support profitability, going forward. Despite liquidity metrics remaining under pressure, improvements were observed due to better profitability, though sustaining this amid subdued demand remains a challenge. Capitalization indicators in FY23 worsened due to erosion in equity base resulting from losses, despite overall borrowings coming down. However, post year-end due to uptick in profitability in the ongoing year, we expect equity base and in turn capitalization metrics to improve. Improvement in capitalization profile on a sustained basis will remain important for ratings.

For further information on this ratings announcement, please contact Mr. Shaheryar Khan at 021-35311861-64 (Ext. 209) and/or the undersigned at 021-35311861-64 (Ext. 207) or email at info@vis.com.pk


Sara Ahmed
Director

Applicable Rating Criteria:
Industrial Corporates
https://docs.vis.com.pk/docs/CorporateMethodology.pdf
VIS Issue/Issuer Rating Scale
https://docs.vis.com.pk/docs/VISRatingScales.pdf

Information herein was obtained from sources believed to be accurate and reliable; however, VIS Credit Rating Company Limited (VIS) does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information.VIS , the analysts involved in the rating process and members of its rating committee do not have any conflict of interest relating to the rating(s)/ranking(s) mentioned in this report.VIS is paid a fee for most rating assignments. This rating/ranking is an opinion and is not a recommendation to buy or sell any securities. Copyright 2024 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .