Press Release

JCR-VIS Revises Entity Ratings of Sitara Chemical Industries Limited

Karachi, May 3, 2011: JCR-VIS Credit Rating Company Limited (JCR-VIS) has revised the entity ratings of Sitara Chemical Industries Limited (SCIL) to ‘A+/A-1’ (Single A Plus/A-One) from ‘AA-/A-1’ (Double A Minus/A-One). Outlook has been ‘Negative’ since September 2010, and remains so.

The changing market dynamics of the caustic soda industry has resulted in a paradigm shift in business risk of the sector leading to an adverse impact on growth, and margins. The erosion in the market share of the older players on account of entry of a new entrant has led to under utilization of production capacities. At the same time, the increased cost of utilities particularly affected the sector. Under this scenario, market participants with higher debt leverage would be at a disadvantage since stress on their repayment ability has increased.

The adverse effect of changing business environment has been considerable for SCIL in terms of narrowing margins leading to reduced earnings. The company, though still the largest operator in the industry, has lost significant market share. The management has planned a partial sell off of its investment property that is likely to lessen burden on cash coverage. However, given the current level of debt leverage, cash coverage would still not be commensurate with the previously assigned rating. 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 021-35311861-70 or fax to 021-35311873 or Mr. Maimoon Rasheed at 042-36610681-84.

Faheem Ahmad
President & CEO

Information herein was obtained from sources believed to be accurate and reliable; however, JCR-VIS Credit Rating Company Limited (JCR-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. JCR-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. JCR-VIS is not an NRSRO and its credit ratings are not NRSRO credit ratings. JCR-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 2011 JCR-VIS Credit Rating Company Limited. All rights reserved. Contents may be used by news media with credit to JCR-VIS.

JCR-VIS Credit Rating Company Limited