Press Release

VIS assigns Initial Ratings to BBJ Pipe Industries Limited (BBJP)

Karachi, October 25, 2022: VIS Credit Rating Company Ltd. (VIS) has assigned initial entity ratings of ‘BBB/A-2’ (Triple B/A-Two) to BBJ Pipe Industries Limited (BBJP). Outlook on the assigned ratings is ‘Stable’. Long-term rating of ‘BBB’ signifies adequate credit quality with sufficient and reasonable protection factors. Risk factors are considered variable if changes occur in the economy. Short-term rating of ‘A-2’ signifies good certainty of timely payment, sound liquidity factors and company fundamentals. Access to capital markets is good. Risk factors are small.

Assigned ratings takes into account moderate to high business risk of the steel sector characterized by volatility in the commodity prices and exposure to currency fluctuations. Ratings factor in three decades of relevant experience and support of the sponsors evidenced through extension of financial support in the past. BBJP has sound internal control and IT framework, however room for improvement exists in governance structure.

Ratings incorporate growth in BBJP’s topline that is largely attributable to volumetric increase in sales of steel pipes in the commercial segment. Amidst monsoon flooding in Pakistan, management expects demand of variety of pipes & tubes to remain stable on account of rebuilding of infrastructure facilities. Going forward, timely commencement of awarded and pipeline projects is considered important to support revenue profile of the Company. On a timeline basis, profitability metrics of the Company have improved mainly due to strategic shift of business towards commercial clients, yielding economies of scale and resulting in margin improvement. However, margins in the recent year have been impacted by rising raw material prices and rupee devaluation. While commodity prices have started to come down, meeting projected profitability in the wake of currency volatility and high interest rate scenario will remain a key rating sensitivity. Liquidity profile of the Company is considered adequate in terms cash flow coverage of outstanding obligations. However, elevated gearing levels relative to business risk and thin margins remains a rating constraint. Projected improvement in the same through consistent profit retention together with improvement in liquidity metrics is considered important for ratings.

For further information on this rating announcement, please contact the undersigned (Ext. 207) or Ms. Asfia Aziz (Ext: 212) at 021-35311861-70 or fax to 021-35311873.









Sara Ahmed
Director

Applicable Rating Criteria: Industrial Corporates (August 2021)
https://docs.vis.com.pk/docs/CorporateMethodology202108.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 2022 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .