KARACHI: JCR-VIS Credit Rating Company Limited (JCR-VIS) has reaffirmed the medium to long-term entity rating of Ittehad Chemicals Limited (ICL) at `A-' (Single A Minus) and short- term entity rating at `A-Two).
Outlook on the assigned rating is `stable'. The previous rating action was announced on December 22, 2014, said press release here on Monday.
Rating assigned to ICL take into account competitive nature of the chlor-alkali sector where volatility in prices and margins has been experienced over the past few years on account of overcapacity.
Operational efficiency of the plant is expected to improve significantly with the conversion on less fuel intensive IEM technology alongwith up-gradation of captive power plant, impact of these initiatives on operating performance is expected to be more visible from the ongoing year.
Rating also take into account moderate financial risk profile of the institution reflected by high gearing and leverage indicators.
Over the last five years, sales of the company have largely remained stable. Deployment of more economical production process and energy sources would support margins, going forward Nevertheless, moderate capacity utilization levels would have their effect.
Given increase in borrowings to fund CAPEX requirements, gearing of ICL have increased in the recent years. Additional borrowing is planned to partially finance the capital outlay for IEM-2 (Phase 2) while remaining funding has been arranged through issuance of right shares.
Cash management would hold the key to debt servicing performance going forward.
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