PACRA Maintains Entity Ratings of Ghani Chemical Industries Limited

Ghani Chemical Industries Limited (‘GCIL’ or ‘the Company’) is principally involved in the manufacturing, sale, and trading of medical & industrial gases and chemicals. These gases find diverse applications across various industries encompassing medical, chemical processes, metal fabrication, food processing, oil and gas exploration, and many more. The industry is led by two major players known for providing high-quality industrial and medical gases and services. The demand for medical gases in the industry is now stabilizing. However, industrial gas performance remains highly dependent on large-scale manufacturing activity. In response, companies are strategically adjusting their product portfolios to better align with current market demands, fostering a more balanced and predictable industry landscape. Ongoing macroeconomic challenges, such as rupee depreciation, soaring inflation & interest rates are still impacting sectors like steel, automotive, and shipbreaking, leading to weaker demand from these areas. The Company currently operates four plants - two in Lahore and two at Port Qasim, Karachi, with an overall capacity utilization of ~71%. To meet the increasing demand in the medical sector, various industries, development projects, and CPEC in K.P.K and Northern areas, GCIL is constructing its 5th Air Separation Unit (ASU) Plant in the Hattar Economic Zone, District Haripur. The ASU plant is scheduled to become operational in July 2024, and a calcium carbide manufacturing facility is expected to be operational by January 2025, according to the management. During 9MFY24, the top line of the company clocked in at ~PKR 3.6bln, reflecting growth of ~12.2% primarily due to price inflation. However, GP Margin was largely sustained but the net profit margin showed a humble improvement due to better cost control. The Company has also a presence in the value-added segment of calcium carbide for fruit repining, contributing about 3% of the total sales. The company has benefited from a modern manufacturing facility and a robust control environment, supported by a strong governing board and a skilled, professional management team. The financial risk profile of the company is deemed adequate, with comfortable coverages, cash flows, and a working capital cycle. The company's capital structure is leveraged, with borrowings consisting of long-term to support expansion and short-term for working capital management.
The ratings are dependent on the Company's ability to effectively utilize enhanced capacities. At the same time, management of financial risk, particularly debt coverages, remains important, wherein any further deterioration would have negative implications for the ratings. Consistent growth in market share and improved margins would support ratings.

About the Entity
Ghani Chemical Industries Limited is a listed entity, incorporated in 2015. The company is primarily engaged in the manufacturing, sale, and trading of industrial, and medical gases and chemicals. Pursuant to the Scheme of Arrangement for merger/amalgamation of G3 Technologies Ltd. with and into Ghani Chemical Industries Ltd., sanctioned by the Lahore High Court vide Order dated October 11, 2022, Pakistan Stock Exchange listed Ghani Chemical Industries Ltd., w.e.f. November 14, 2022. The Company is a subsidiary (~56%) of Ghani Global Holdings Limited which is owned majorly by the Ghani Family (~52.64%). The remaining shareholding lies in Ghani Products (Pvt.) Ltd ~18%, directors of the company and the general public. Members of sponsoring family majorly represent Ghani Chemicals’ four-member board. Mr. Masroor Ahmad Khan is the Chairman of the board while Mr. Hafiz Farooq Ahmad holds the office of CEO. They are assisted by a management team with extensive experience and a diversified skillset.