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JCR-VIS reaffirms Entity Ratings of Sitara Chemical Industries Limited

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by March 7, 2013 General

Karachi, March 07, 2013 (PPI-OT): JCR-VIS Credit Rating Company Limited (JCR-VIS) has reaffirmed the entity ratings of Sitara Chemical Industries Limited (SCIL) at ‘A+/A-1’ (Single A Plus/A-One). Outlook on the assigned rating is ‘Stable’.

The ratings take into account SCIL’s prominent position in caustic soda sector as evident by largest market share in caustic soda sales. Overall margins of chlor-alkali industry increased during FY12 and 1H13 on account of considerably higher average selling price of caustic soda and related products.

The industry has also benefited from initiation of export of caustic soda liquid, mainly to India. Industry-wide capacity utilization improved during 1H13 on account of better availability of gas as compared to corresponding period last year. Capacity utilization and margins of the sector remain vulnerable to power and gas shortages at least in the short to medium term.

SCIL has been able to post healthy earnings for FY12 and on-going year, mainly on account of higher margins of the chemical division. The performance of textile segment remained under stress during FY12; however, margins of the segment are expected to improve in the on-going year that will further augment profitability of the company.

Healthy profitability indicators had a positive impact on internal cash generation capacity, which provided considerable support to debt servicing ability of the company. There is some maturity mis-match evident on the company’s balance sheet resulting in low current ratio. The management is considering alternative energy sources to ensure smooth supply of electricity, materialization of which will further streamline operations.

For more information, contact:
Mr. Javed Callea
Advisor
JCR-VIS Credit Rating Company Limited
Tel: +9221 35311861 (10 lines) (Ext: 501)
Fax: +9221 35311872-3
E mail: javed.callea@jcrvis.com.pk

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