PACRA maintains entity ratings of NIMIR Industrial Chemicals Limited

July 17, 2023 (MLN): Pakistan Credit Rating Agency Limited (PACRA) has maintained entity ratings of NIMIR Industrial Chemicals Limited (PSX: NICL) at "A+" for the long term and "A1" for the short term with a stable outlook forecast, the latest press release issued by PACRA showed.

NICL demonstrated consistent growth and a strong position in the domestic oleo chemicals and chlor alkali products manufacturing industry.

NICL’s product portfolio is well-diversified and mainly concentrated in Oleochemicals followed by Chlor-Alkali and Aerosols.

During the period under review, the company has successfully completed all the capacity expansion projects, such as oleo chemical plants expansion, and chlor alkali plants expansion.

As a part of the diversification strategy a new plant, related to liquid chlorine paraffin wax (CPW) has also achieved commercial operation recently, which is an import substitution.

The company has followed a vertical integrated down-the-chain strategy and for that purpose, they have 3rd party manufacturing to provide a one-window solution to their customers.

The topline of NICL showed 34.3% growth during 9MFY23, mainly due to inflationary impact, and slightly better volumes.

However, margins showed some dilution due to consistent increase in interest rates and associated borrowing costs.

As a part of cost efficiency and control measures, a new 20 megawatts powerhouse (Coal + Biomass) is now fully operational and expected to bring sizeable savings.

Going forward, the company is focusing on its exports (oleo chemicals & CPW) and to serve this purpose a wholly-owned subsidiary is incorporated in Azerbaijan.

The operations of the company are benefited by advanced production facilities alongside an experienced management team and a strong control environment.

Moreover, NICL has a considerable amount of trade receivables which according to management representation are due to MNC and inflationary pressures mainly elevating the receivables level.

The company has expanded its capacity to cope with the demand is expected to boost revenues and contribute to the bottom line.

Furthermore, the financial risk profile is characterized by moderate coverages and cashflows and working capital cycle.

The capital structure is leveraged, where borrowings are comprising a mix of short-term for working capital management and long-term for CAPEX.

The ratings are dependent on sustaining margins and profitability in line with business expansion. Prudent management of working capital and retaining strong coverages are critical.

Successful expansion and translation of the same in revenues is important.

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