Press Release
VIS Reaffirms Entity Ratings of Sitara Chemical Industries Limited
Karachi, June 02, 2025: VIS Credit Rating Company Limited (VIS) has reaffirmed entity ratings of Sitara Chemical Industries Limited (“SCIL” or “the Company”) at 'A+/A2' (Single A plus/ A Two). Medium to long term rating of 'A+' indicates good credit quality; protection factors are adequate. Risk factors may vary with possible changes in the economy. Short-term rating of 'A2' indicates good likelihood of timely repayment of short-term obligations with sound short-term liquidity factors. Outlook on the assigned ratings has remained Stable. Previous Rating action was announced on June 14, 2024.
SCIL, established in 1981, is a leading chemical manufacturer in Pakistan and the flagship entity of the Mian Muhammad Adrees Group. Based in Faisalabad, SCIL operates across chemicals, oleo chemicals, and textiles, with a diversified product mix including caustic soda, hydrochloric acid, and specialty chemicals. The Company serves both domestic and international markets, supplying key downstream sectors such as textiles, food and beverage, and paper. Its presence in oleo chemicals and textiles enhances revenue stability and diversification. SCIL is investing in coal-based captive power generation to reduce operational costs and grid energy dependency and long-term sustainability.
Assigned ratings take into account the business risk profile of Pakistan’s chemical manufacturing sector, with specific focus on the chlor-alkali segment. The sector benefits from moderate demand cyclicality, limited competition due to trade protection measures, and high entry barriers stemming from capital intensity and regulatory compliance for hazardous materials. Demand is supported by downstream linkages with various domestic industries, partially insulating the sector from economic cyclicality. SCIL operates with a diversified product mix within the chemical segment and maintains a notable share in the chlor-alkali market. Industry-wide output moderated in FY24, on account of lower offtake from the textile sector. Competitive pressures remain moderate, while trade protection and local currency depreciation have supported domestic players. Energy cost sensitivity persists, with rising gas tariffs impacting margins. SCIL continues to rely on captive energy sources, and its coal-based power generation is being expanded to meet full internal requirements.
Assigned ratings takes into account the business risk diversification into cotton textile and the support in contribution margin provided by it. The rating also reflect the Company’s time line stability in the financial risk profile. Profitability remained under pressure due to higher input costs and limited pricing flexibility, though topline growth was sustained by the chemical segment. Margin compression was on account of by elevated raw material costs and higher finance expenses amidst a high-interest rate environment. Some improvement was observed in the ongoing period as borrowing costs eased. Capitalization indicators moderated due to increased long-term funding for expansion and maintenance projects, though internal capital generation provided partial support. Liquidity remained tight, influenced by elevated short-term borrowings, despite consistent profit retention. Debt servicing capacity stayed aligned with operational cash flows and showed recovery in the ongoing period. Future financial performance is expected to benefit from ongoing capacity enhancement and efficiency measures.
Going forward, the ratings will remain dependent on the timely execution of ongoing projects, realization of associated efficiency gains, and restoration of profitability margins. Sustained performance across all segments and improvement in financial indicators will be critical to maintaining rating stability.
For further information on this ratings announcement, please contact at 021-35311861-64 or email at info@vis.com.pk.
Applicable Rating Criteria:
Industrial Corporates
https://docs.vis.com.pk/docs/CorporateMethodology.pdf
VIS Issue/Issuer Rating Scale
https://docs.vis.com.pk/docs/VISRatingScales.pdf