RAM Ratings assigns long-term rating of A- to Lankem Ceylon PLC

RAM Ratings Lanka has reaffirmed the respective long- and short-term corporate credit ratings of Lankem Ceylon PLC (“Lankem” or “the Group”) at A- and P2. Concurrently, we have assigned a long–term rating of A- to Lankem’s proposed LKR 500 million unsubordinated unsecured redeemable debentures (2010/2015). Both long-term ratings have a stable outlook.

The ratings are supported by stable demand for Lankem’s key product - agrochemicals - and its dominant market positions in most of its business lines. On the other hand, the ratings are moderated by the Group’s heavy debt burden.

Lankem was incorporated in 1964, focusing primarily on agrochemicals. Over the years, the Group has ventured into various other sectors, including industrial chemicals and bituminous products, paints, consumer products, construction, plantations and leisure. The Group’s primary revenue drivers are its plantation and chemicals businesses. We note that Lankem derives assured revenue from agrochemicals, i.e. crucial inputs in the cultivation of paddy, which in turn is processed into rice, Sri Lanka’s staple food.

The Group enjoys dominant positions in most of its business segments; it is the market leader in agrochemicals and thinner products and one of the leading players in the paints industry. The Company is also one of the