Press Release

VIS Reaffirms Medium to Long Term Rating, Revises Short Term Rating of Sitara Chemical Industries Limited

Karachi, January 27, 2023: VIS Credit Rating Company Limited (VIS) has reaffirmed the medium to long-term entity rating of Sitara Chemical Industries Limited (SCIL) at ‘A+’ (Single A Plus). The short term rating of SCIL has been revised from ‘A-1’ (A-One) to ‘A-2’ (A-Two). The medium to long-term rating of ‘A+’ signifies good credit quality and adequate protection factors; risk factors may vary with possible changes in the economy. The short-term rating of ‘A-2’ denotes good certainty of timely payment coupled with sound company fundamentals. Access to capital markets is good. Outlook on the assigned rating is ‘Stable’. The previous rating action was announced on November 22, 2021.

The assigned rating draws comfort from its competitive market position in the Chlor-alkali sector being the market leader along with the strong support of sponsors. The rating is underpinned by moderate business profile, having posted sizable revenue growth, mainly in chemical segment on account of volumetric increase in caustic soda and other allied products. However, declining trend in gross margins on a time line basis reflect increasing competitive pressures in the industry. In FY22 and Q1’23, gross margins were adversely impacted due to surge in energy costs led by increase in commodity prices of coal and RLNG. Margins were further aggravated by higher finance costs emanating from increase in policy rate along with higher working capital requirements. Consequently net margins were recorded lower. In the ongoing year, profitability metrics may remain subdued on account of weakening in the textile sector which remains a major caustic soda consumer. However, the Company has added the soap noodles plant, which commenced operations in Jun’21, and is expected, over time, to contribute towards revenue diversification and margin improvement. Revision in short term rating takes into account current operating performance of the Company. However, liquidity factors and Company fundamentals remain sound. Leverage indicators have also increased on account of increase in short term borrowings. Going forward, ratings will remain sensitive to sustainability of margins, market share and maintenance of cash flow and liquidity indicators.

For further information on this rating announcement, please contact Mr. Shaheryar Khan (Ext: 209) or the undersigned (Ext: 207) at 021-35311861-66 or email at

Sara Ahmed

VIS Entity Rating Criteria: Corporates (August 2021)

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