The Pakistan Credit Rating Agency Limited
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Uswa Sikandar

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PACRA Maintains Entity Ratings of Cnergyico Pk Limited

Rating Type Entity
(28-Aug-23 )
(25-Aug-22 )
Action Maintain Maintain
Long Term A- A-
Short Term A2 A2
Outlook Stable Stable
Rating Watch Yes Yes

The ratings reflect the resilient business profile of Cnergyico Pk Limited (Cnergyico) emanating from its diversified operational capability and its strategic importance in the domestic context. Cnergyico possesses a notable share in meeting the economy's demand for petroleum products, with its refinery and marketing business. Deteriorating economic conditions including plummeting rupee, highest ever inflation and difficulties in establishment of LCs’ due to shortage of foreign exchange have severely impacted local oil sector. However, recently approved brownfield refining policy by the government aiming at upgradation of existing oil refineries to produce environmentally friendly fuels and minimize production of loss-making products shall have improved implications on their financial conditions. The key sponsoring family - Abbassciy family, is committed to ensure continuity and extending essential support. Cnergyico's refinery business remains exposed to the vicissitudes in international crude and petroleum products’ (POL) prices, which in turn, steer the gross refining margins (GRMs) of the Company. The company has been managing working capital requirements through short-term borrowings (FY23: PKR 31.56bln). However, in FY23, Cnergyico’s throughput remained below par due to working capital constraints as availability of funding was squeezed by the rising USD/ PkR parity, thus resorting the company to enter into open credit arrangements with its crude oil suppliers. This led to frequent disruptions in operations and Cnergyico closed third quarter of FY23 at net loss of PKR (10,474) mln (FY22: PKR 4,788mln: FY21: PKR 3,596mln). This trend is expected to continue in the upcoming quarters till sustainable funding arrangements are made as management is currently deliberating upon multiple options to improve its WC and profitability. With no significant long-term banking exposure, Cnergyico’s financial risk profile is stretched with reliance on sponsors’ loan and short-term borrowings . A significant portion of sponsors loans was waived off in FY23 and negotiations are underway with the banks to restructure portion of its short-term loans which shall give the required breathing space to the company to focus on continuity of its operations. Impeccable and well-documented support available to the Company from its main sponsors has given a significant boost to the derived ratings.
Improved performance indicators including business continuity and maintaining refinery’s throughput to effectively shield the company from external vulnerabilities and promising financial discipline, are imperative for the ratings. The entity has been placed on Rating Watch to oversee challenges on the business and financial risk profile of the company, amongst others, related to industry dynamics.

About the Entity
Cnergyico, incorporated in 1995, is listed on the Pakistan Stock Exchange. It is engaged in the manufacturing, production, and sale of a large range of petroleum products via its refinery and marketing segments. The refinery complex of the company comprises two refineries. With the aggregate designed capacity of ~155,000 barrels per day, Cnergyico has the highest refining capacity, in the country. The company is a subsidiary of Cnergyico Mu Incorporated (CMI) which currently holds 70.73% shares in the company, while the rest is spread among Financial Institutions and General Public. Mr. Amir Abbassciy has been the Chief Executive Officer of Cnergyico since January 1, 2017 while Mrs. Uzma Abbassciy is the Chairperson of the Board.

The primary function of PACRA is to evaluate the capacity and willingness of an entity to honor its obligations. Our ratings reflect an independent, professional and impartial assessment of the risks associated with a particular instrument or an entity. PACRA's comprehensive offerings include instrument and entity credit ratings, insurer financial strength ratings, fund ratings, asset manager ratings and real estate gradings. PACRA opinion is not a recommendation to purchase, sell or hold a security, in as much as it does not comment on the security's market price or suitability for a particular investor.