Following is the text of press release issued by
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The ratings reflects
The profitability is expected to remain under pressure as appliance production was shutdown in line with provincial government directives. The Company has resumed full operations and sales have picked up lately, especially in power division (Power Transformers). The cashflows remained under pressure and, coupled with high quantum of borrowings, resulted in deteriorated coverages. PEL is exposed to financial risk owing to long inventory and receivable cycle. However, the Company was able to reduce inventory and receivable days, creating cushion at trade levels.
Capital structure is characterized by intermediate leveraging. Going forward, measures announced by SBP is expected to provide relief in terms of debt servicing and lower interest cost. The Company has issued privately placed Sukuk V (Dec-19) to finance working capital requirements. The management intends to match last years sales on the back of better performance of power division, compensating sales loss in appliance division.
The Negative Outlook and 'Rating Watch' signify adverse impact of COVID-19 outbreak, economic slowdown and prevailing uncertainty. PACRA will monitor the prevailing situation and update the ratings accordingly.
The rating is dependent on the management's ability to sustain operations and sales in prevailing challenges. Meanwhile, any significant deterioration in sales and margins will impact the rating. Close monitoring of working capital requirements to improve cash cycle and debt servicing remains imperative. Managing liquidity and financial risk are crucial for the rating.
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