Press Release

JCR-VIS Assigns Entity Ratings to Hascol Petroleum Limited

Karachi, December 28, 2012: JCR-VIS Credit Rating Company Limited (JCR-VIS) has assigned medium to long term entity rating of ‘A-’ (Single A Minus) and short term rating of ‘A-2’ (A-Two) to Hascol Petroleum Limited (Hascol). Outlook on the medium to long-term rating is ‘Stable’.

Ratings take into account improvement in the company’s profitability and funds from operations over the past two years. Effective inventory management has had a positive impact on margins; continuity of this trend primarily depends on price volatility and pro-active decision making by the management. Gearing has also improved on account of fresh equity injection coupled with internal capital generation. Keeping in view the industry dynamics and that the company is still in its growth phase with increasing working capital requirements, gearing needs to be maintained on the lower side to avoid any stress on debt repayment capacity.

Substantial increase in sales of High Sulphur Furnace Oil (HSFO) to independent power producers has been witnessed in FY11 and the on-going year. Greater reliance on higher margin products i.e. High Speed Diesel (HSD) and Motor Spirit (PMG), mostly sold through the retail channel, will facilitate in achieving sustainable growth in sales volumes over the long term. The management is cognizant of the fact, and has anticipated a paradigm shift in business dynamics with the completion of its new storage facilities, critical for boosting sales through the retail channel. Shikarpur depot is expected to become operational within the next month, while the company is presently pursuing financing arrangements for the Machike depot, targeted to be completed by June 2013. Timely completion of these depots is likely to improve competitive position of Hascol in the industry, enabling it to supply petroleum products across the country at competitive rates as well as reducing product delivery time. JCR-VIS will keenly track progress in this regard.

Presently operating through a network of around 200 fuel stations, the company has plans to expand its retail network subsequent to the completion of the aforementioned storage facilities. Hascol has exclusive franchise arrangements with Fuchs Lubricants Germany (FUCHS) to produce and market lubricants as well as greases under the FUCHS brand name in the local market. Lubricants are a high margin business and improved marketing and sales efforts are likely to have a positive impact on overall business profitability.

Shareholding has changed hands in the past and further changes are anticipated in the coming months with the intention of listing the company also on the anvil. Management team of the company comprises experienced professionals having prior association with the oil industry. Successful implementation of the new enterprise resource planning (ERP) system, JD Edwards, targeted to go live in January 2013, will create a centralized database, enhance controls over business processes and reduce turnaround time through automation.

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

Jamal Abbas Zaidi
Deputy CEO

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 not an NRSRO and its credit ratings are not NRSRO credit ratings.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 2012 VIS Credit Rating Company Limited. All rights reserved. Contents may be used by news media with credit to VIS.

JCR-VIS Credit Rating Company Limited