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The Pakistan Credit Rating Agency Limited
Press Release

Date
20-Sep-22

Analyst
Sohail Ahmed Qureshi
sohail.ahmed@pacra.com
+92-42-35869504
www.pacra.com

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This press release is being transmitted for the sole purpose of dissemination through print/electronic media. The press release may be used in full or in part without changing the meaning or context thereof with due credit to PACRA

PACRA Assigns Initial Entity Ratings to Nimir Chemicals Pakistan Limited

Rating Type Entity
Current
(20-Sep-22 )
Action Initial
Long Term A-
Short Term A2
Outlook Stable
Rating Watch -

Nimir Chemicals Pakistan Limited (‘NCPL’ or ‘the Company’) is primarily engaged in the manufacturing and marketing of Phthalic Anhydride (PA), Di-Octyle Phthalate (DOP), followed by Alkyd Resins (AR), & other trading products to feed the demand of downstream sectors. The ratings reflect NCPL’s long-established history and leading position in the domestic petrochemical products industry. NCPL is the major PA producer in Pakistan retaining strong market share of ~80%. It captures around ~40% share in DOP segment, ~21% in AR and ~14% in MA. Pakistan’s reliance on imported intermediate chemicals is reducing with time as local companies are injecting more investments to increase their production capacities. The sector is considered as a backbone in the development of forward linked industries (including leather, paint, textile, footwear, sports goods, plastic & PVC). As Pakistan is a net importer of oil, gas, coal and allied products; the sector faces considerable production cost pressures amidst high international energy prices and currency devaluation. Specifically, the fluctuating prices of crude oil in the international markets can challenge industry’s growth, partially set-off by the producers’ ability to pass on price hike. Besides, expected growth in the construction & coating/paint industry and demand for PVC products will have positive sales impact on Plasticizers (DOP), PA, and AR in long-run. National Tariff Commission of Pakistan has imposed definitive anti-dumping duties on imports of PA to support the local market players. The Company’s revenue streams are driven by PA sales channeled to its associated concern together with sales of DOP, AR, and MA to diverse customer base. Despite inflationary pressure, the Company registered ~40.7% CAGR in CY21, with DOP, PA and alkyd resins contributing around ~97% in revenues. The mentioned growth is a function of better prices and slightly higher volume. Margins of the Company are aligned with topline improvement. Moving forward, the Company has to put together realistic projections to monitor financial results. The Company’s sophisticated plant technology has led to achieve operational efficiency and reduce overheads. Financial risk profile of the Company is demonstrated by efficient working capital management, adequate coverages, and comfortable cash flows. NCPL’s capital structure is marginally leveraged, mainly encompassed STBs. Ownership base of the Company is solely represented by sponsoring family. Going forward, the implementation of good governance and internal control system are required to ensure compliance at all levels and smooth running of operations.
The ratings are dependent on rationalization of the management’s strategies to sustain position in domestic market amid changing business environment. With topline growth; profitability margins and prudent financial profile shall remain imperative.

About the Entity
Nimir Chemicals Pakistan Limited, acquired in 2011 from Knightsbridge Chemicals Limited, London. The present management gained entire stake of NCPL through family members as an intended backward integration strategy. The Company is involved in the production of petrochemical intermediate products, having two prime products, Phthalic Anhydride with installed capacity of ~30,000 MT/p.a and Di-Octyle Phthalate with installed capacity of ~21,400 MT/p.a. Currently, the ownership stays with Mr. Anjum Nisar (~57.50%) & Mr. Tariq Nisar (~42.50%). The board comprises four members, Mr. Anjum Nisar chairs the board whilst Mr. Tariq Nisar serves as the CEO of the Company.

The primary function of PACRA is to evaluate the capacity and willingness of an entity to honor its obligations. Our ratings reflect an independent, professional and impartial assessment of the risks associated with a particular instrument or an entity. PACRA's comprehensive offerings include instrument and entity credit ratings, insurer financial strength ratings, fund ratings, asset manager ratings and real estate gradings. PACRA opinion is not a recommendation to purchase, sell or hold a security, in as much as it does not comment on the security's market price or suitability for a particular investor.