Press Release

VIS Reaffirms Entity Ratings of Sitara Chemical Industries Limited
 

Karachi, November 22, 2021: VIS Credit Rating Company Limited (VIS) has reaffirmed the entity ratings of Sitara Chemical Industries Limited (SCIL) at ‘A+/A-1’ (Single A Plus/A-One). The medium to long-term rating of ‘A+’ signifies good credit quality with strong protection factors. Moreover, risk factors may vary with possible changes in economy. The short-term rating of ‘A-1’ denotes high certainty of timely payments coupled with excellent liquidity and supported by good fundamental protection factors. Outlook on the assigned ratings is ‘Stable’. The previous rating action was announced on October 27, 2020.

The ratings assigned to SCIL take into account its leading position in the Chlor-alkali sector with the highest market share of around 46% and ample experience of sponsors in the relevant industry. The ratings incorporate moderate business risk profile entailing sizable revenues in a highly competitive operating environment. The ratings factor in growth in topline emanating from both chemical and textile divisions mainly on back of increase in volumetric sales, driven by related industrial growth in the country, specifically in the textile sector. Gross margins improved slightly in the outgoing year while net margins improved notably on account of rationalized operating costs, lower finance cost, higher other income and slightly lower effective tax rate. Cash flow coverages have remained adequate. Liquidity indicators in terms of current ratio need improvement in line with the rating benchmarks. Leverage indicators, albeit increased slightly, have remained manageable. A newly established soap noodles plant started commercial operations in June 2021. The management is also in process of installing stearic acid line to further diversify the product mix that is expected to come online by end-Dec’21. Meanwhile, rising electricity and RLNG tariff along with recent supply constraints of coal would remain key challenges for the ongoing year. The ratings will remain sensitive to sustainability of margins along with keeping leverage indicators at comfortable level.

For further information on this rating announcement, please contact Ms. Tayyaba Ijaz (042-35723411-13, Ext. 8004) and/or the undersigned at 021-35311861-66 (Ext. 306) or email at info@vis.com.pk



Faryal Ahmad Faheem
Deputy CEO


VIS Entity Rating Criteria: Corporates (August 2021)
https://docs.vis.com.pk/docs/CorporateMethodology202108.pdf

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