PACRA Maintains Entity Ratings of Nimir Chemicals Pakistan Limited

Nimir Chemicals Pakistan Limited (‘NCPL’ or ‘the Company’) is primarily engaged in the manufacturing & marketing of Phthalic Anhydride (PA), Di-Octyl Phthalate (DOP), followed by Alkyd Resins (AR), and Maleic Anhydride (MA) to feed the demand of downstream sectors. Phthalic Anhydride is a basic component for further downstream industries like DOP, UPR, and Alkyd Resins, thus creating value addition from plasticizers to the manufacturing of artificial leather, plastic moldings, cable compound, flexible PVC, hoses, footwear, paint, textiles, and various other products. The ratings reflect NCPL’s long-established history and prominent position in the domestic petrochemicals industry (specifically in PA and DOP). Currently, the country is grappling with many macroeconomic challenges such as soaring inflation, elevated interest rates, high energy costs, etc. These factors eroded consumer purchasing power and increased operational costs, reducing demand and profitability. Additionally, increased local competition from a new market entrant and rising imports in the PA segment impacted the company’s market share, especially in PA. However, the company still maintains a dominant position in PA. During 1HCY24, the company could sustain its topline due to price inflation, but margins posted dilution at all levels. To mitigate these challenges, the company is implementing a two-pronged strategic expansion which includes refining the product portfolio by prioritizing the production volumes and sales from PA to DOP and concurrently deploying a diversification strategy into high-margin specialized chemicals like polyurethane (PU) and pigments. This will increase the market reach, revenue streams, and profitability margins. The company has no major CAPEX requirement for the expansion and will rely on internal cash flows only. The financial risk profile of the company is demonstrated by adequate working capital management, strong coverages, and low-leveraged capital structure. The ratings take comfort from the Nisar Family's strong position in the market and now the company’s sponsors recognize the need for a well-structured, formally documented family constitution, which is in its final stages of development.
The ratings are dependent on the firm’s ability to maintain its market position in the face of challenging industry dynamics along with positive topline growth. With the growth in the firm’s volume; prudent financial performance as depicted in projections shall remain imperative. Successful strategic expansions and a clearly outlined family constitution will be crucial for businesses’ long-term sustainability.

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-Octyl 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.