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PACRA Maintains Entity Ratings of Nimir Chemicals Pakistan Limited

Rating Type Entity
(14-Sep-23 )
(20-Sep-22 )
Action Maintain Initial
Long Term A- A-
Short Term A2 A2
Outlook Stable Stable
Rating Watch - -

Nimir Chemicals Pakistan Limited (‘NCPL’ or ‘the Company’) is primarily engaged in the manufacturing & marketing of Phthalic Anhydride (PA), Di-Octyle Phthalate (DOP), followed by Alkyd Resins (AR), and Maleic Anhydride (MA) to feed the demand of downstream sectors. The ratings reflect NCPL’s long-established history and prominent position in the domestic petrochemicals industry (specifically in PA and DOP). 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. Phthalic Anhydride is a basic component for further downstream industries like DOP, UPR and Alkyd Resins, thus creating value addition from plasticizers to manufacturing of artificial leather, plastic moldings, cable compound, flexible PVC, hoses, footwear, paint, textile, and various other products. 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 a backbone in the development of forward-linked industries. However, the sector faces considerable production cost pressures amidst high energy prices, massive currency devaluation, and high borrowing costs. In CY22, NCPL's topline registered ~9.6% growth mainly due to price inflation, but the margins displayed dilution at all levels due to foreign exchange losses and elevated finance costs. In 1HCY23, the performance showed improvement as the company was able to pass on cost hikes to its customers and implemented changes in its sales strategy which enabled the company to reduce reliance on short-term borrowings. Going forward the demand side from the construction, coating/paint, and PVC products are expected to remain subdued due to the challenging economic situation hence will impact the volumes of Plasticizers (DOP), PA, and AR in near future. The National Tariff Commission of Pakistan imposed definitive anti-dumping duties on PA imports to support the local players. NCPL’s revenue streams are driven by PA sales coupled with sales of other products to a diverse customer base. Its growth function is usually a mix of better prices and higher volume though, former was the prime factor during recent periods. Predominantly, NCPL has to put together realistic projections to monitor financial results. Financial risk profile is demonstrated by efficient working capital management, adequate coverages, and comfortable cash flows. Currently, NCPL’s capital structure is low-leveraged. Going forward, the implementation of good governance, and improvement in internal control system is 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 a 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. It 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%) and 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.