Press Release

JCR-VIS Reaffirms Entity Ratings of Hascol Petroleum Limited

Karachi, July 07, 2015: JCR-VIS Credit Rating Company Ltd. (JCR-VIS) has reaffirmed the entity ratings of Hascol Petroleum Limited (HPL) at ‘A+/A-1’ (Single A Plus/A-One). Outlook on the assigned ratings is ‘Stable’. The previous rating action was announced on March 31, 2014.

The assigned ratings reflect HPL’s healthy financial risk profile as evident from the company’s profitability and cash flow from operations in relation to outstanding obligations. Trade debts have been maintained at manageable levels; the company secures its sales to Independent Power Producers (IPPs) with financial instruments to ensure timely collection; continuity of this arrangement at higher operating volumes will be tested over time.

Financial performance of companies within the Oil Marketing sector has been affected during 9MFY15 on account of decline in oil prices which has resulted in inventory losses. Impact of inventory losses has varied across industry players. HPL’s lower inventory holding period and proactive supply chain management has allowed the company to limit inventory losses in relation to other industry players.

Ratings also incorporate growing market share of the company which has been achieved on the back of enhanced storage capacity and expanding retail footprint, in line with the business plan earlier communicated by the management. During 2014, HPL completed and commissioned its Machike installation. This along with additional storage capacities acquired on lease at Port Qasim and Kemari has resulted in enhancement of storage capacity of depots/terminals. Aggressive expansion of storage facilities is planned to continue with 17,200MT and 40,000MT of additional capacities projected to come online during 2015 and 2016, respectively. Retail footprint which has increased to 280 is also planned to grow further, which will be supported by the company’s growing storage capacities for efficient supply of products. During 2014, HPL acquired strategic holding in Pakistan Refinery Limited representing 13.74% shares of PRL; management expects synergies from the same to accrue over time.

Despite significant decline in oil prices, net sales witnessed healthy growth during 2014 on the back of higher volumes. As part of a deliberate strategy, HPL has pursued growth in higher margin products though in general there has been an increase across the product line; along with increase in OMC margins, this has translated into improved gross margins in 1Q15. Going forward, profitability of the company is expected to continue to depict strong growth on the back of volumetric growth in sales.

For further information on this rating announcement, please contact the undersigned (Ext: 501) or Ms. Sobia Maqbool, CFA (Ext: 604) at (021)35311861-70 or fax to (021)35311872-3.



Javed Callea
Advisor

Applicable Rating Criteria: Oil & Gas Industry (February 2004)
http://www.jcrvis.com.pk/images/oilngas.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 2015 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .