November 15, 2018 (MLN): JCR-VIS Credit Rating Company Limited (JCR-VIS) has reaffirmed the entity ratings of Sitara Chemical Industries Limited (SCIL) at ‘A+/A-1’ (Single A Plus/A-One). Outlook on the assigned ratings is ‘Positive’.
According to the press release by JCR, the medium to long-term rating of ‘A+’ denotes good credit quality coupled with adequate protection factors. Moreover, risk factors may vary with possible changes in the economy. The short-term rating of ‘A-1’ denotes high certainty of timely payment, liquidity factors are excellent and supported by good fundamental protection factors.
The ratings assigned to SCIL take into account its leading position in the Chlor-alkali sector with the highest market share. The ratings incorporate moderate business risk profile; the company has been able to maintain positive momentum in revenues and largely sustain margins in a highly competitive operating environment.
The ratings draw additional comfort from low financial risk appetite emanating from its low leveraged capital structure and adequate debt service coverage. The company’s strong sponsor profile remains a key rating factor.
Further, conversation of investment property into an earning asset and additional liquidity generation from its sale therein is considered a positive rating factor.
Going forward, rising international coal prices, increase in natural gas tariff and cost of imported RLNG along with adverse exchange rate parity are key challenges to be managed for maintaining profitability.
