Press Release

JCR-VIS Maintains Entity Ratings of Sitara Chemical Industries Limited at AA-/A-1

Karachi, September 7, 2010: JCR-VIS Credit Rating Company Limited (JCR-VIS) has maintained the medium to long-term entity rating of Sitara Chemical Industries Limited (SCIL) at ‘AA-’ (Double A Minus) and short-term rating at ‘A-1’ (A-One).

The market dynamics of the caustic soda industry have 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 SCIL. Consequently, revenues, margins and market share of SCIL 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 altered market dynamics of the industry, Outlook on the assigned rating has been revised to ‘Negative’.

The company is pursuing the strategy of expansion, revamping and diversification on different projects including Caustic soda liquid plant, new Caustic solidification plant and Single Super Phosphate (SSP) plant. These are expected to contribute towards cost efficiencies and greater market outreach. Given the increasing level of competition in the industry, the company would require greater focus on its marketing strategy. While cash flows are still strong, matching of funds raised for capex may need to be improved to avoid any pressure on debt servicing coverage in the short term. Changing market conditions may also put stress on cash flows in future and ratings may be reviewed accordingly. JCR-VIS will continue to monitor the level of future cash flows to assess the impact on liquidity profile and debt servicing capacity of the company.

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