Press Release

JCR-VIS Re-affirms TFC Rating of Sitara Chemical Industries Limited at AA- with ‘Stable’ Outlook

Karachi, December 29, 2006: JCR-VIS Credit Rating Company Limited (JCR-VIS) has re-affirmed the medium to long-term rating of TFC-1 of Sitara Chemical Industries Limited (Sitara) at AA- (Double A Minus) with ‘Stable’ outlook.

The rating affirmation takes into account Sitara’s position as the market leader in the domestic caustic soda market and the continuous efforts of the company’s management to improve production through timely investments. Although margins came under pressure in FY2006, mainly due to rising electricity costs, the commissioning of the new caustic soda plant in June 2006 (which would have the dual effect of reducing electricity costs due to the use of more efficient technology as well as increasing capacity) along with the setting up of the new self-generation facility for electricity that is expected to cater to around 20% of the plant’s requirements, should enable Sitara to post improved operating profitability indicators in FY2007. The higher level of debt, however, will mean that the company’s financial charges will also post a sharp rise in FY2007.

The company is also in the process of finalizing three other major projects, designed to increase utilization of the main by-product of caustic soda production, i.e. chlorine, and create diversification in the sources of revenue. The financing options for these projects are still under consideration. However, since the rated TFC issue is due for maturity in June 2007, raising of further long-term debt is not expected to impact the servicing of the TFC.

For further information on this rating announcement, please contact Mr. Safdar Kazi (Ext: 221) or Mr. Saad Ahmed Madani ( 219) at 021-5671822/5671833/5680996 or fax to 021-5681105/5671600.

Saad Ahmed Madani
Group Head
Corporates & Structured Finance

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 2006 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