LRA Assigns Initial Entity Rating to CIC Holdings PLC

The rating reflects CIC Holdings PLC (the Company) strong business profile as the Company operates both as an operating company and as a holding company. The Company has a presence in five distinct verticals namely i) Crop solutions, ii) Agri Produce, iii) Industrial Solutions, iv) Health and Personal Care, and v) Livestock Solutions with the majority considered essential items. Pharmaceuticals, Medical Devices, Industrial Chemicals, and Agro-Chemicals businesses are operated through the Company and it has substantial strategic investments in other essential business avenues such as animal nutrition, packaging, plant nutrition and protection etc. The Company, being a predominant importer of its products, has exhibited greater resiliency in these difficult times evidenced by the revenue, margins, and profitability, which have increased despite a very difficult operating environment. However, the Company remains vulnerable to import restrictions, foreign currency availability, and exchange rate fluctuations. CIC Holdings receives dividend income from its subsidiaries (mainly Akzo Nobel), which bodes well with cash flows. Consequently, coverages remained adequate over the period, though it declined recently (1HFY23: 1.5x, FY22: 4.2x) due to significant increases in interest rates and higher short-term borrowing to meet working capital requirements. The Company has a moderately leveraged capital structure, with short-term borrowings only. Association of the Company with sponsoring family (Captain Family) and the financial strength and acumen of sponsors, bodes well for the Company.
The rating is dependent on the management's ability to prudently manage its working capital and borrowings in this high interest rate environment. Meanwhile, sustaining margins and profitability, resulting in stable cashflows, is critical. A substantial increase in borrowings resulting in deterioration in coverages would be considered credit negatives.

About the Entity
CIC Holdings PLC is a limited liability company incorporated and domiciled in Sri Lanka under Companies Act No. 07 of 2007 and listed in the Colombo Stock Exchange. The majority of the shares of the Company are held by Paints & General Industries Limited (53.31%) which is owned by the Captain Family. Mr. R S Captain who has over 15 years of experience in the manufacturing sector, acts as a Non-Independent, Non-Executive Director of CIC. The Company’s Board comprises of 7 members of which all 7 members are Non-Executive Directors. Five members are Independent directors and two are considered Non-Independent. The management team is headed by Group CEO Mr. Aroshan Seresinhe who is supported by an able team of experienced professionals.