The Pakistan Credit Rating Agency Limited
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Shazia Afzal

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PACRA Maintains Entity Ratings of Siddiqsons Tin Plate Limited

Rating Type Entity
(24-Dec-20 )
(27-Dec-19 )
Action Maintain Maintain
Long Term A- A-
Short Term A2 A2
Outlook Stable Stable
Rating Watch - -

The ratings reflect Siddiqsons Tin Plate Limited’s ("Siddiqsons Tinplate" or the "Company") established foothold in the tin plate industry as the first and sole local manufacturer of tin plate in Pakistan with a market share of ~30% in the local market. The demand for the Company’s products has shown growth in the recent past due to increased hygiene consciousness of the public at large and higher use of processed food. The major contribution for the increased sales as compared to Jun'19, is the exponential growth in export sales. On the other hand, local sales are down by 22% due to economic slow down, tax related matters and uncertain business conditions induced by lockdown. On the overall basis, the cost of sales increased by 10% but the impact could not pass on and sales revenue recorded an increase of only 4%. Resultantly, the gross margins took a dip at 5.1% during FY20 (FY19: 9.8%). The capacity utilization of tinplate segment remained low at ~20% (FY19: 17%) but lately improved in quarter end on Sep'20 on the back of rising demand. The Company is in process of establishing a Cold Rolled Coil (CRC) steel manufacturing complex to streamline its raw materials supply through backward integration. However, delays in COD are expected,as the supplier didn't provide machinery within the contractual time frame. The Company is in process of negotiating the procurement of CRM plant from other international suppliers and expecting a favorable outcome. The Company’s financial risk profile is considered adequate characterized by moderate leveraging, good coverages and improved working capital. The Company has funded expansion with equity so far, without taking any long term debt. The ratings take comfort from the financial strength of the Siddiqsons group and demonstrated support from sponsors. Going forward, the Company is also focusing on its export window.
The ratings are dependent upon translation of capital investments into growing profits, holding sustained operations and improving margins. The maintenance of coverages during expansion phase will be critical. External factors and continuity of anti-dumping duty is considered crucial for the sustainability of the Company.

About the Entity
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 ~46% shares, while ~15% are indirectly held through Siddiqsons Limited. Around 9.3% shares are held by Arcelor Packaging international. 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 manufacturing facilities are located at Windhur, Balochistan and Malir, Karachi.

The control of the Company vests with Board of Directors, which comprises seven members. There are two independent directors, three non-executive directors and two executive directors including 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 business ventures.

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.