VIS assigns initial entity ratings to ICI Pakistan Limited

April 15, 2021: VIS Credit Rating Company Limited has assigned initial entity ratings of ‘AA/A-1+’ (Double A/A-One Plus) to ICI Pakistan Limited (ICI). The medium to long-term rating of ‘AA’ signifies high credit quality; Protection factors are strong. The short-term rating of ‘A-1+’ signifies high certainty of timely payments; short-term liquidity including internal operating factors and/or access to alternative sources of funds is outstanding and safety is just below risk-free Government of Pakistan’s short term obligations.

The Outlook on the assigned rating is ‘Stable’.

Incorporated in 1952, ICI is engaged in the manufacture of polyester staple fibre, POY Chips, soda ash, specialty chemicals, sodium bicarbonate and polyurethanes; marketing of seeds, manufacturing and distribution of pharmaceuticals and animal health products; and merchanting of general chemicals and manufacturing of Masterbatches.

The company has production facilities located in Karachi, Lahore, Khewra (Jhelum), Sheikhupura, Kasur and Hattar. Ratings assigned to ICI also draw support from the strong financial profile and diversified presence of the Company’s sponsor, Yunus Brothers Group (YBG) which is a leading conglomerate having presence across multiple sectors including Cement, Power, Real Estate, Textiles, Chemicals, Pharmaceuticals, Healthcare, Food and Automotive Sectors.

The business risk profile of the company is considered well-diversified with minimal inter-dependence between segments. Ratings incorporate ICI’s market leadership position in the soda ash segment, second largest market share in the polyester segment, the low business risk profile of the pharmaceuticals segment, and sizeable growth potential in the animal health and chemicals and agri-sciences divisions. While all business segments remain exposed to changes in the macro-environment, ratings derive comfort from the diversity across industries and customers supported by a historical track record of sustained profitability.

Assessment of financial risk profile incorporates the strong balance sheet position with sound liquidity and capitalization profile. Profitability profile has historically been supported by dividend income from investments; VIS expects this trend to continue going forward.

Going forward, management envisages further improvement in the profitability profile of the company on the back of projected expansions in value-added business segments. The liquidity profile of the company depicts sufficient cash flow coverages of outstanding obligations. In line with the projected increase in profitability, the liquidity profile of the company is expected to further strengthen, going forward. Low leverage indicators, conservative financial policy and healthy internal capital generation depict a sound capitalization profile.

Given expansion plans in the Soda Ash and Polyester business segments, leverage indicators of the company are expected to increase, however, VIS expects gearing levels to remain below 1(x) over the rating horizon led by consistent improvement in the projected profitability profile. Maintenance in financial indicators at current levels is considered important from a rating perspective.

VIS