Press Release

VIS Reaffirms Entity Ratings of Ittehad Chemicals Limited

Karachi, February 25, 2022: VIS Credit Rating Company Limited (VIS) has reaffirmed the entity ratings of Ittehad Chemicals Limited (ICL) at ‘A-/A-2’ (Single A Minus/A-Two) with a ‘Positive’ outlook. The medium to long-term rating of ‘A-’ signifies good credit quality with adequate protection factors. Moreover, risk factors may vary with possible changes in economy. The short-term rating of ‘A-2’ denotes good certainty of timely payments coupled with sound liquidity and company fundamentals. The previous rating action was announced on November 19, 2020.

The ratings assigned to ICL take into account its sizeable market in the Chlor-alkali sector and experience of sponsors in the industry. The ratings are underpinned by moderate business risk profile manifested by sizable revenues in a highly competitive operating environment. Growth in topline is primarily backed by higher volumetric sales of Caustic Soda and Linear Alkylbenzene Sulphonic Acid (LABSA), a surface acting cleaning agent, in tandem with overall industrial growth in the country, with improvement in profit margins in the outgoing year. Diversification in LABSA has supported topline over the years. The ratings also derive comfort from adequate liquidity and comfortable leverage indicators. The management is in the process of increasing operational efficiency of gas fired power engines along with capacity enhancement of LABSA, which are expected to bode well for the company. However, surge in fuel and power cost and raw material consumed has impacted the profit margins and cash flow coverages during 1HFY22. The management expects to recoup margins to a greater extent on a full year basis as the prices have been increased accordingly to pass on the impact of hike in costs. Rising electricity cost and escalation in RLNG would remain key challenges for the entire industry in the ongoing year. The ratings would remain dependent upon capacity enhancement within stipulated timeframe along with recouping the profitability profile and maintaining debt coverage indicators at comfortable level.

For further information on this rating announcement, please contact Ms. Tayyaba Ijaz (042-35723411-13, Ext. 8004) and/or the undersigned at 021-35311861-66 (Ext. 306) or email at info@vis.com.pk



Faryal Ahmad Faheem
Deputy CEO


VIS Entity Rating Criteria: Corporates (August 2021)
https://docs.vis.com.pk/docs/CorporateMethodology202108.pdf

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