September 9, 2011: PACRA has assigned a long-term entity rating of "A" (Single A) and short-term rating of "A2" (A Two) to Descon Oxychem Limited. These ratings denote a low expectation of credit risk emanating from a strong capacity for timely payment of financial commitments.
The ratings recognize the company's leading position in the local H2O2 market, supplemented by efficient production process, sound technological infrastructure, and effective control environment. The management is pursuing a focused strategy to enhance the product awareness, which would give boost to product demand while ensuring sustainable margins. DOL has significant reliance on gas as a basic raw material wherein, though it has relatively small gas
needs, given the prevailing energy shortage in the country this would remain a concern. The company's cash flows, and in turn coverages, remain adequate against challenges of temporary gas shortage and price fluctuations. Ratings draw comfort from DOL's association with a financially sound and diversified business group - Descon - that in the past has demonstrated support.
Descon Oxychem Limited (DOL), a green-field project for producing Hydrogen Peroxide (H2O2) and is listed on Karachi Stock Exchange. Descon, the principal sponsor of DOL, holds majority shareholding of DOL through associated companies and sponsoring family members. Descon is a diversified group having interests in engineering, chemicals and power businesses. The group, over the years, has expanded its horizons to United Arab Emirates, Saudi Arabia, Qatar, Oman and Egypt.
The financial year ending June 30, 2011 was stellar for DOL, where it achieved a Profit after tax of PKR 180mln, and having an EPS of PKR 1.76/share. DOL produced 29,792 MTs of Hydrogen Peroxide (at 50% concentration), an increase of 9,652 MTs or 48% over last year. The production utilization has been around ~106% this year, against 72% last year. DOL is the market leader in terms of production of hydrogen peroxide and has more than 55% market share. Within the current external environment and local market conditions Descon Oxychem is well placed to grow profitably over the years. (Press Release)