Press Release

JCR-VIS Maintains Entity Ratings of Sitara Chemical Industries Limited

Karachi, February 22, 2012: JCR-VIS Credit Rating Company Limited (JCR-VIS) has maintained the entity ratings of Sitara Chemical Industries Limited (SCIL) at ‘A+/A-1’ (Single A Plus/A-One). Outlook on the medium to long-term rating has been revised from ‘Negative’ to ‘Stable’.

The Chlor-Alkali industry has witnessed increase in prices as evident from recent recovery in margins of some major players. In the long run, demand of caustic soda along with capacity utilization of production lines is highly dependent on the growth of manufacturing sector. Moreover, the industry remained stressed on account of power and gas shortages. Given that the major players are exploring relatively cheaper source of alternative energy, the pressure on performance is expected to be alleviated to a certain extent. At the same time, better availability of natural gas in summer would further ease stress in the short run. In view of above scenario, repayment ability of companies with continued operations is expected to improve, going forward.

SCIL remained the largest operator during FY11 and its market share in caustic soda remained around the previous year’s level. The company also owns and operates yarn manufacturing facility, the performance of which was exceptional during FY11. However, on account of cyclical shift in market dynamics, the sustainability in profitability in this segment is expected to be compromised in the near term.

The industry has somewhat absorbed negative implications visible owing to lower capacity utilization, an outcome of increase in product oversupply. SCIL has been able to arrest the declining trend in sales volumes while its profitability has been augmented recently through adopting measures aimed at cost control. It is also making efforts to rationalize the debt mix, which will help in improving debt leverage and cash coverage ratios. JCR-VIS will continue to monitor the level of future cash flows to assess the impact on liquidity profile and debt servicing ability of the company.

For further information on this rating announcement, please contact Mr. Rashid Zahir at rashid.zahir@jcrvis.com.pk or Mr. Maimoon Rasheed at 042-36610681-84.



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 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 February 22, 2012 VIS Credit Rating Company Limited. All rights reserved. Contents may be used by news media with credit to VIS.