Press Release

VIS Credit Rating Company Assigns Initial Entity Ratings to Archroma Pakistan Limited

Karachi, January 07, 2022: VIS Credit Rating Company Limited (VIS) has assigned initial entity ratings of ‘AA/A-1’ (Double A /A-One) to Archroma Pakistan Limited (ARPL). Long Term Rating of ‘AA’ reflects high credit quality, strong protection factors, and moderate risk but may vary slightly because of economic conditions. Short Term Rating of ‘A-1’ indicates high certainty of timely payment, excellent liquidity factors supported by good fundamental protection factors and minor risk factors. Outlook on the assigned ratings is ‘Stable’.

Archroma Pakistan Limited was formed in 2013 from the textiles, paper & emulsions business of Clariant. Clariant itself was formed in 1995 as a spin off from Sandoz, a chemical & pharmaceutical company incorporated in Pakistan and listed on PSX in 1963. Since its inception, i.e. Sandoz, Clariant and now Archroma has been primarily engaged in the manufacture and sales of chemicals, dyestuffs, coating, adhesive and sealants for the textile, paper, construction, and home care industries. Archroma is a global, diversified provider of specialty chemicals operating in over 35 countries and with 26 production sites. Archroma Pakistan Limited is 75% owned by Archroma Textiles GmbH Switzerland. The Company has two production facilities located in Karachi and Jamshoro (Sindh) with a broad range of product portfolio. Overall corporate governance structure of the company is considered sound.

Assigned ratings incorporate strong parent profile, leadership position in the specialty chemicals market and moderate business risk profile. Given major revenue contribution emanating from the textile segment, stable demand outlook and sizeable market presence depicts medium to low business risk profile. In addition, GoP’s support package and increasing momentum of construction activity in the country bodes well for the business risk profile of the company. Supply chain uncertainties and constraints due to dependence on China and key global & regional suppliers for raw materials along with exchange rate volatility remain key business risks. Resolution of supply chain challenges is considered important from a ratings perspective.

Ratings incorporate strong financial position of the Company with improving profitability, healthy liquidity and sound capitalization indicators. The Company has reported steady growth in topline on a timeline basis. Gross margins have remained stable over the past four years. Sensitivity of margins to change in input prices is mitigated through pass through ability of the Company. Going forward, given increased focus towards value-added segments, margins and overall profitability of the Company is projected to increase. On account of higher profitability, lower debt levels, and improved working capital cycle, cash flow from operations provide healthy debt servicing coverage. While equity has recorded modest growth on account of higher dividend payout, ratings draw comfort from the strength of the parent group. Capitalization indicators have remained strong. Increase in equity along with reduction in debt over time has resulted in improved leverage indicators. Ratings remain dependent on maintaining financial metrics at current levels, going forward.

For further information on this rating announcement, please contact Ms. Asfia Aziz (Ext. 213) or Ms. Faryal Ahmad Faheem (Ext. 306) at 021-35311861-66 or email at info@vis.com.pk.


Saeed Khan
Executive Director

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 .