Karachi, March 30, 2023 (PPI-OT): VIS Credit Rating Company Limited (VIS) has maintained entity ratings of Ittehad Chemicals Limited (ICL) at ‘A-/A-2’ (Single A Minus/A-Two). 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 outlook on the rating has been revised from ‘positive’ to ‘stable’. Previous rating action was announced on February 25, 2022.
The ratings assigned to ICL take into account its eminent position in the Chlor-alkali sector with sizable market share of ~30% and ample experience of sponsors in the industry. The ratings take into account the business risk of the sector, ICL’s performance and its moderate financial risk profile.
The business risk of the chemical segment is classified as ‘Medium to Low’ VIS classifies the business risk of the chemical segment as ‘Medium to Low’, characterized by ‘Medium’ cyclicality, ‘Low’ competition, ‘High to Medium’ capital intensity and ‘Medium’ energy sensitivity.
The ratings also factor in ICL’s topline growth and profitability performance. Growth in topline is backed by higher pricing of caustic soda and Linear alkylbenzene sulfonic Acid (LABSA). In addition, diversification in LABSA has provided impetus to the topline over the years and accounted for nearly one-third of the sales mix. While profit margins have improved in the ongoing year, the industry remains exposed to currency volatility given imported raw material content and competitive market forces.
The assigned ratings incorporate ICL’s status as a listed entity and derives comfort from adequate liquidity and comfortable leverage indicators, however, rising cost of electricity and escalation in RLNG prices remains a key challenge. Ratings remain sensitive to sustainability of margins along with maintenance of leverage indicators at comfortable levels.
For more information, contact:
Director Compliance and Rating Analytics,
VIS Credit Rating Company Limited
VIS House, 128/C, 25th Lane off Khayaban-e-Ittehad,
Phase VII, DHA, Karachi, Pakistan
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