Press Release

JCR-VIS Reaffirms Entity Ratings of Ittehad Chemicals Limited

Karachi, January 25, 2018: JCR-VIS Credit Rating Company Limited (JCR-VIS) has reaffirmed the entity ratings of Ittehad Chemicals Limited (ICL) at ‘A-/A-2’ (Single A Minus/ A-Two). Outlook on the assigned rating is ‘Stable’. The previous rating action was announced on December 20, 2016.

Ratings assigned to ICL take into account the company’s prominent position in the chlor-alkali sector. Ratings also incorporate conservative risk appetite of sponsors that has resulted in adequate financial profile of the company. Ratings also recognize management’s continuing efforts of technology advancement in order to minimize operating costs.

The company is in the process of replacing IEM-I plant with more efficient IEM-III, which is likely to be commercially operational by 4QFY18. Subsequently, the management intends to utilize IEM-I plant only on a need basis. Meanwhile, the obsolete DSA plant has been scrapped in FY17.

Caustic soda remained the primary contributor in overall sales during FY17. While revenue increased on the back of higher volumetric sales, the positive impact was partly diluted on account of decline in margins. Gross margins declined mainly owing to lower average prices of caustic soda and some other auxiliary products. Recent increase in the product price and commencement of timely commercial operations of IEM-III are expected to help in improving margins. Being prudent, the company continues to recognize provision related to industrial as well as captive power consumption under Gas Infrastructure Development Cess.

The company has issued right shares during the last two consecutive years. This along with reduction in borrowings have resulted in decline in gearing while debt service coverage has remained comfortable. The company has embarked upon exploring various avenues in order to diversify its business risk. Going forward, gearing and coverages are projected to remain sound.

For further information on this rating announcement, please contact the undersigned at 021-35311861-70 or Mr. Maimoon Rasheed at 042-35723411-13.

Javed Callea

Applicable Rating Criteria: Industrial Corporates (May 2016)

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 2018 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