Karachi, November 19, 2020 (PPI-OT): VIS Credit Rating Company Limited (VIS) has reaffirmed the entity ratings of Ittehad Chemicals Limited (ICL) at ‘A-/A-2’ (Single A Minus/A-Two). The medium to long-term rating of ‘A-’ signifies good credit quality with strong protection factors. Moreover, risk factors may vary with possible changes in economy. The short-term rating of ‘A-2’ denotes good certainty of timely payments coupled with sound liquidity and company fundamentals. Outlook on the assigned ratings is ‘Positive’. The previous rating action was announced on August 26, 2019.
The ratings assigned to ICL take into account its significant position in the Chlor-alkali market along with strong sponsor support. The ratings are underpinned by moderate business risk profile manifested by sizable revenues in an oligopolistic operating environment. The establishment of multi-pronged revenue stream through product line extensions has given positive impetus to sales. However, margins and profitability position of the company took a dip during the outgoing year owing to depressed economic activity amid ongoing pandemic.
The ratings draw comfort from manageable financial risk appetite emanating from its moderately leveraged capital structure, improved capitalization indicators and adequate debt service coverage. Liquidity profile is considered strong given healthy cash flows in relation to outstanding obligations and limited trade debts as majority of the sales are on cash. Receipt of tax refunds due from the GoP further bolstered liquidity profile.
However, rupee devaluation and risk of resurgence of COVID-19 till the vaccine is developed remain key challenges. Going forward, the company’s ability to maintain upward trajectory in revenues both in core business and new products introduced while improving profit margins and containing leverage indicators around current levels would be the key rating driver.
For more information, contact:
Director Compliance and Rating Analytics,
VIS Credit Rating Company Limited
VIS House, 128/C, 25th Lane off Khayaban-e-Ittehad,
Phase VII, DHA, Karachi, Pakistan