Press Release

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

Karachi, March 18, 2013: 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 entity rating at ‘A-2’ (A-Two). Outlook on the assigned ratings has been revised from ‘Negative’ to ‘Stable’.

ICL holds a prominent position in the Chlor-Alkali industry with a market share of around 24% in caustic soda for the year ended Dec, 12. Sales revenue increased on account of revision in selling price across the product spectrum alongwith modest increase in overall production. Margins of the company have remained a function of availability and cost related to fuel; the most important component in the production process. Moreover, supply of gas has remained relatively better during the ongoing year in comparison to FY12. In addition to this, installation of coal based gasifiers for steam generation led to reduction in cost of production. Meanwhile, financial cost of the company subsided on account of declining interest rates and lower outstanding borrowings. Given improved profitability, equity base of the company has improved on a timeline basis.

Following the partial repayments of long term loans, leverage indicators of the company have improved during FY12 and in the ongoing year. ICL plans to replace production line of DSA plant with the more efficient IEM technology during FY13. Moreover, a 17MW coal based power plant is also planned in the future. Both these projects are expected to be financed through bank borrowings. Going forward, leverage indicators may trend upwards, though expected to remain within manageable limits. Cash flows of the company have remained robust during the ongoing year on account of improved margins.

For further information on this rating announcement, please contact Ms. Sobia Maqbool, CFA at 021-35311681-70 or Mr. Maimoon Rasheed at 042-36610681-84.

Abdur Rahim, ACII

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JCR-VIS Credit Rating Company Limited