Press Release

VIS Maintains Entity Ratings of Pakistan Cables Limited

Karachi, Aug 1, 2023: VIS Credit Rating Company Limited (VIS) has maintained the entity ratings of Pakistan Cables Limited (PCL) at ‘A/A-1’ (Single A/A-One). Outlook on the assigned ratings have been revised from ‘Stable’ to ‘Negative’. The long-term rating of ‘A’ signifies good credit quality with adequate protection factors. Risk factors may vary with possible changes in the economy. The short-term rating of ‘A-1’ indicates high certainty of timely payment. Liquidity factors are considered excellent and supported by good fundamental protection factors. Risk factors are minor. The previous rating was announced on May 16, 2022.

The assigned ratings take into consideration the Company’s robust sponsorship profile, strong brand equity and one of the leading positions in the local wire and cable industry. Ratings factor in medium business risk owing to its reliance on imported raw materials and fixed operating costs. However, revision in outlook reflects elevation in overall business and financial risk profile during the ongoing year on account of deteriorating macroeconomic conditions. With limited foreign exchange availability and currency devaluation, procurement of essential raw materials has been strained while high levels of inflation and tight supply chains have reduced the feasibility of construction projects thereby affecting the demand from such projects. Furthermore, cost overruns from the impending expansion and consequent impact of the same on debt servicing due to elevated debt levels are impacting the outlook on the ratings. The company has plans in place to overcome this in near future.

Over the medium-term, management forecasts demand to emanate from utility segment, underground electrification in housing societies, and solar driven demand from industries and institutions off-setting the slowdown expected from mega institutional projects. Assigned ratings factor in the Company’s plans to expand its production capacity with an under implementation new state-of-the-art plant at Nooriabad that will also help streamline manufacturing processes and enhance efficiency.

Assessment of financial risk profile incorporates stable net margins, compressed cash flow coverages and elevated capitalization profile. Improvement in gross margins during the review period were supported by better margins on account of ability to pass on cost to customers and better efficiency, however, higher financing costs and impairment losses registered pertaining to investment in associate in FY22 impacted net margins. With reduction in net margins and high debt levels, cash flow coverages against outstanding obligations and leverage levels reported weakening in the review period. The ratings will remain sensitive to the Company’s projected financing plan to meet capital expenditures and ability to contain capitalization and liquidity indicators at levels that commensurate the benchmarks for the assigned ratings.

For further information on this rating announcement, please contact Ms. Asfia Amanullah and/or the undersigned at 021-35311861-66 (Ext. 207) or email at info@vis.com.pk


Sara Ahmed
Director

VIS Entity Rating Criteria: Corporates (May 2023)
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 2023 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .