Press Release

JCR-VIS Reaffirms Entity Ratings of Sitara Chemical Industries Limited

Karachi, June 07, 2016: JCR-VIS Credit Rating Company Limited (JCR-VIS) has reaffirmed the entity ratings of Sitara Chemical Industries Limited (SCIL) at ‘A+/A-1’ (Single A Plus/A-One). Outlook on the assigned ratings is ‘Stable’. The previous rating action was announced on December 31, 2014.

SCIL enjoys leading market share in the Chlor-alkali sector which has remained largely stable in the recent years. Revenues from core chemical division are supplemented, though moderately, by sales from spinning division. Over the last five years, sales of the company have posted a CAGR of around 9%. Overall margins remained depressed during FY15 attributable to subdued prices of caustic soda and yarn and higher fuel expenses as there was higher reliance on expensive sources of electricity. Improved prices of caustic soda during the ongoing year reflected positively on the margins.

SCIL is setting up a 35MW coal fired power plant to substitute expensive fuel arrangements leading to lower fuel cost of the company. Moreover, calcium chloride plant is expected to strengthen the product mix of SCIL. Impact of these initiatives on operating performance is expected to be more visible beginning FY17 onwards. Management’s decision to dispose a portion of its non earning investment property is viewed positively; timely receipt of associated cashflows is considered important for generation of additional liquidity.

With additional borrowing availed for coal based power plant during the ongoing year, financial risk profile of SCIL have increased though remained commensurate with the outstanding ratings. Debt metrices are expected to rationalize as majority repayments are scheduled in the coming years; internal cash generation is considered adequate to meet the upcoming repayments.

For further information on this rating announcement, please contact the undersigned (Ext: 501) at 92-21-35311861 or Mr. Mohammed Khalid Ali (Ext: 508) at 92-21-35311861 or fax to 92-21-35311873.

Javed Callea
Advisor

Applicable Rating Criteria: Industrial Corporates (October 2003)
http://www.jcrvis.com.pk/images/IndustrialCorp.pdf

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 June 07, 2016 VIS Credit Rating Company Limited. All rights reserved. Contents may be used by news media with credit to VIS.