PACRA Maintain Entity Ratings of KSB Pumps Company Limited

The ratings reflect the leading position of KSB Pumps Company Limited ("KSB Pumps" or "the Company") as a leading manufacturer of pumps, valves and related services in Pakistan. The ratings incorporate KSB Pumps' association with KSB SE & Co. KGaA, Germany (KSB Germany), which is one of the top five pump manufacturers in the world with a presence in over 150 countries. The Company operates a state-of-the-art manufacturing facility certified by KSB Germany as MBK – Made by KSB, and this certification is supplemented by strong systems and controls, providing access to KSB Germany's licensing and technical knowledge. Consequently, the Company enjoys a competitive advantage in both the domestic market and for exports to other countries, including group companies. Sale of pumps to industrial customers and exports to KSB group companies make up a significant part of revenues. Additionally, the Company’s revenues are supported through project sales to public and private sectors; however, public sector proportion has decreased as Company has now gone into indirect model for these projects with private companies for improved liquidity. The Company reported a topline of PKR 3,814mln for 9MCY24 (CY23: PKR 5,755mln, CY22: PKR4,965) and posted a net loss of PKR 139mln for 9MCY24 (CY23: PKR 1mln, CY22: PKR 39mln). However, the 3QCY24 showed positive performance, with a net profit of PKR 29mln. KSB Pumps saw an improvement in gross margins during CY23, reaching 20.4%. This positive trend has continued into 9MCY24, with margins reported at 19%. The rise is due to increase in exports share in its sales mix, however, their impact is invalidated at net level due to increase in finance cost. The Company is confident of achieving its budgeted figures for CY24, driven by the improved gross margin trend expected in the fourth quarter. This confidence is supported by a significant order in hand that will be expected to materialize in this period. To address the previously strained working capital and weakened coverage ratios, the Company initiated a rights issuance process, which was successfully completed in September 2024. The proceeds were utilized to fulfill working capital requirements and reduce outstanding running finance balances, resulting in a net cash surplus of PKR 250mln as of 9MCY24. Following the completion of the rights issuance, the Company’s balance sheet as of September 2024 reflects a debt-free position. This strategic move aligns with the confidence and trust placed by the Parent Company in KSB Pumps' operations, underscores its strategic importance, which is considered positive. Ratings also take comfort from strong group support, technically and financially, and from its eligibility, under KSB group guidelines, to obtain intercompany loans and utilize umbrella credit facilities created by the parent company. However, during its entire history, the Company never resorted to borrowing from Germany.
The ratings are dependent on the Company's ability to improve its core margins and profitability through diversification, execution of better margin projects and exports to group companies. Prudent working capital management and maintaining strong coverages with improved capacity utilization are imperative for the ratings going forward.

About the Entity
KSB Pumps is a public limited company, incorporated in July 1959 and got listed in 1971 on PSX. KSB Pumps is a subsidiary of KSB SE & Co. KGaA, Germany with ~73% of the shareholding. KSB SE & Co. KGaA, Germany is a leading international supplier of pumps, valves and related systems for the Industrial applications. The board comprises eight members and is chaired by Dr. Sven Baumgarten. Mr. Imran Ghani, a mechanical engineer by profession is the CEO of the Company.