Muhammad Atif Chaudhry
PACRA maintains the rating of Siddiqsons Tinplate Limited
The assigned rating emanates from Siddiqsons Tinplate Limited’s ("STPL" or the "Company") status as the sole manufacturer of tinplate in Pakistan and the Company's moderately leveraged capital. The Company mainly derives its revenues from the sale of Electrolytic Tinplate (ETP). The sales of the Company are highly correlated with the edible oils sector in the local industry. The sales decreased by ~ 19% during FY22 and clocked in at PKR ~4.7bln (FY21: PKR ~5.8bln). The decrease in the top line is mainly attributable to a decrease in the sales volumes due to the demand factors, which remained volatile due to abnormally high prices which forced end consumers to opt for alternative modes of packaging. Resultantly, the net margin of the Company decreased to ~4.3% during FY22 (FY21: 5.5%). During FY22 the capacity utilization of the Company stood at ~13% decreasing from ~25% during FY21. Net working capital days also have shown an increasing trend due to weak working capital management but the raw material inventory maintained by the Company shielded the Company from the effect of rising steel prices. The Company was involved in arbitration in Singapore, with Plant and Machinery (P&M) supplier for the CRC project, the award whereof has been released in favor of the P&M supplier. Since STPL was a respondent under the matter and has not been afforded relief, it has been decided by the Company that the arbitral award be challenged in the High Court of Singapore for which the Company is of the view that there is a high likelihood that the arbitral award shall be set-aside in its entirety.
The Company has finalized the alternate supplier and the project is expected to complete in 24 months from the date of commencement. This backward integration is expected to streamline the raw materials challenges. The Company is exposed to a modest level of financial risk as its financial risk profile is characterized by moderate capital structure and improved coverages. The Company plans to obtain PKR ~8.4bln debt for the development of the CRC complex.
The ratings are dependent upon the company’s ability to sustain its healthy business profile amidst strong competition, herein, effective and prudent management of financial risk indicators remain important. Moreover, upholding of governance framework is vital.
Sidiqsons Tin Plate Limited was incorporated in 1996. It is listed on Pakistan Stock Exchange (PSX). The controlling stake is held by Rafi Family. The family directly holds ~41% shares, while~15% are indirectly held through Siddiqsons Limited. The remaining shareholding is held by individuals and financial institutions. The principal business activity of the Company is manufacturing and sale of tin plates, cans and other steel products. The registered office of the Company is in Karachi.
The control of the Company vests with the Board of Directors, which comprises seven members. There are two independent directors, three non-executive directors, and two executive directors including the CEO. All non-executive directors represent Rafi Family. The Chairman of the board is Mr. Tariq Rafi. Mr. Rafi is a seasoned business professional and carries a track record of multiple successful ventures.