Press Release

VIS Credit Rating Company Reaffirms Entity Ratings to ICI Pakistan Limited

Karachi, June 30, 2022: VIS Credit Rating Company Limited has reaffirmed entity ratings of ICI Pakistan Limited (‘ICI’ or ‘the Company’) at ‘AA/A-1+’ (Double A/A-One Plus). The medium to long-term rating of ‘AA’ signifies high credit quality; Protection factors are strong. The short-term rating of ‘A-1+’ signifies high certainty of timely payments; short-term liquidity including internal operating factors and/or access to alternative sources of funds is outstanding and safety is just below risk free Government of Pakistan’s short term obligations. Outlook on the assigned rating is ‘Stable’. The previous rating action was announced on April 09, 2021.

Incorporated in 1952, ICI is engaged in the manufacture of polyester staple fibre, POY chips, soda ash, specialty chemicals, sodium bicarbonate and polyurethanes; marketing of seeds, manufacturing and distribution of pharmaceuticals and animal health products; and merchanting of general chemicals and manufacturing of Masterbatches. The Company has an investment in wholly owned Subsidiary “ICI PowerGen Limited.” The Company also has an investment in Subsidiary Company namely NutriCo Morinaga (Private) Limited, engaged in manufacturing, marketing and distributing formula products. The Company has production facilities located in Karachi, Lahore, Khewra (Jhelum), Sheikhupura, Kasur and Hattar.

Ratings assigned to ICI also draw support from strong financial profile and diversified presence of the Company’s sponsor, Yunus Brothers Group (YBG) which is a leading conglomerate having presence across multiple sectors including Cement, Power, Real Estate, Textiles, Chemicals, Pharmaceuticals, Healthcare, Food and Automotive Sectors.

Business risk profile of the Company is considered well-diversified with minimal inter-dependence between segments. Ratings incorporate ICI’s market leadership position in the soda ash segment, second largest market share in polyester segment, low business risk profile of the pharmaceuticals segment, and sizeable growth potential in the animal health and chemicals and agri-sciences divisions. While all business segments remain exposed to changes in the macro environment, ratings derive comfort from the diversity across industries, existence in businesses/products which are essential to the needs of local customers and supported by historical track record of sustained profitability.

The assigned rating incorporates ICI’s financial risk measures (gearing & leverage), which have remained aligned with historical trend. The cash flow coverage indicators remain adequate for the assigned rating. Going forward, there are plans to take up additional debt, which will be used to partly finance the newly planned float glass JV. Incorporating the enhanced debt requirements, ICI’s gearing is expected to rise, albeit it is projected to remain below 1x through the rating horizon. Further, some portion of debt is at reduced rates in the form of TERF and LTFF and fixed for long term. Changes in debt composition have been noted, with short term running finance comprising majority (59%) of the debt as of March 2022. Given the uptick in short term borrowing, shorter term liquidity measures - such as coverage of short term debt by stock of inventory and trade debts - have come under stress, when viewed in context of the ‘A-1+’ short term rating assigned to the Company. As per management, the uptick in short term debt is a one-off, wherein international commodity prices increased drastically along with rupee devaluation. Moreover, inventory buying was ramped up due to volatility in Commodity prices and supply chain disruptions. Accordingly, these are likely to normalize going forward. The assigned rating remains dependent on maintenance of business and financial risk metrics in line with the threshold for the assigned rating.


For further information on this rating announcement, please contact Mr. Arsal Ayub, CFA or the undersigned (Ext. 201) at 021-35311861-70 or email at info@vis.com.pk .






Javed Callea
Advisor

Applicable Rating Criteria: Industrial Corporates (August 2021)
https://docs.vis.com.pk/docs/CorporateMethodology202108.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 2022 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .