Press Release

JCR-VIS maintains entity ratings of Ittehad Chemicals Limited at A-/A-2

Karachi, September 7, 2010: JCR-VIS Credit Rating Company Limited (JCR-VIS) has maintained the medium to long-term entity rating of Ittehad Chemicals Limited (ICL) at ‘A-’ (Single A Minus) and short-term rating at ‘A-2’ (A-Two).

The market dynamics of the caustic soda industry has experienced a change in competitiveness with the entry of a new player. The additional capacity added has eased off the supply side significantly thus bringing down the capacity utilization of the older players including ICL. Consequently, revenues, margins and market share of ICL have been adversely affected. With modest growth in demand, excess supply and its consequent impact on margins is likely to persist in near future. In view of the altered market dynamics of the industry, Outlook on the assigned rating has been revised to ‘Negative’.

To cope with the increase in competition and also support its margins in the long run, the company is in the process of completing BMR of its Ion Exchange Membrane plant. ICL is also planning a complete replacement of its other plant that is based on an older technology, which would primarily be financed through a syndicated loan facility with some contribution through equity. The debt burden for capital expenditure needs to be carefully planned and spaced to maintain serviceable leveraging in the medium-term and avoid pressure on the cash flows of the company which have so far remained within satisfactory levels.

The level of future cash flows would be monitored to assess their impact on liquidity profile and debt service capacity of the company. Changing market conditions may reduce cash flow coverage and ratings may require to be reviewed accordingly.

For further information on this rating announcement, please contact Mr. Javed Callea at 0213-5311861-70 or fax to 0213-5311873 or Mr. Maimoon Rasheed at 0423-6610681-84.

Faheem Ahmad
President and CEO

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 not an NRSRO and its credit ratings are not NRSRO credit ratings.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 2010 VIS Credit Rating Company Limited. All rights reserved. Contents may be used by news media with credit to VIS.

JCR-VIS Credit Rating Company Limited