Press Release

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

Karachi, April 27, 2012: 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). Outlook on the assigned rating is ‘Negative’.

The Chlor-Alkali industry has witnessed pressure on margins due to excess supply situation and severe shortage of gas supply. In order to address the issue major players are exploring relatively cheaper sources of alternate energy. This along with the expected resumption in gas supply during the summer season is expected to improve profitability in the short term. In the long run, demand of caustic soda along with capacity utilization of production lines is highly dependent on the growth of manufacturing sector.

In spite of lower volumes, sales were higher in FY11 and onwards on account of increase in prices, margins declined as ICL was forced to rely on costly furnace oil driving up production cost significantly. To overcome this constraint, the company has purchased a Coal Based Gasifier for steam generation which would help in reducing fuel cost to a certain extent. The management also plans to replace the existing DSA plant, which is expected to reduce power consumption considerably. However, timeline for the above mentioned project is currently uncertain.

Weakening in cash flows has been witnessed in the on-going year, which has adversely impacted the company’s debt servicing ratio. Consequently ICL has relied on a mix of additional borrowings and cash generated from operations for carrying out the planned capex and repaying its current obligations. However, stress on cash flows is likely to ease off with the continuous resumption in gas supply from April,’12, which is expected to continue till the start of next winter season.

For further information on this rating announcement, please contact Mr. Rashid Zahir at or Mr. Maimoon Rasheed at 042-36610681-84.

Jamal Abbas Zaidi
Deputy 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 2012 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