PACRA maintains the entity ratings of Liberty Mills Ltd

July 07, 2025 (MLN): Pakistan Credit Rating Agency (PACRA) has maintained the entity rating of Liberty Mills Limited (LML) at ‘A+’ for long term and at ‘A1’ for short term, with a ‘stable’ outlook forecast.

LML emanates from the prominent profile of the Company in the textile industry of Pakistan.

The Company is a family-owned, truly vertically integrated textile unit that operates under the umbrella of Liberty Group and is considered a flagship Company.

LML product slate is vested in three business segments, which include Home Textile, Health Care Textiles & Apparel.

Home Textile occupies the leading position in the Company’s portfolio valuation, followed by Health Care Textile and Apparel.

Over the years, LML has achieved consistent and steady growth in business volumes, positively reflecting on its business profile.

Despite challenging macroeconomic conditions, the Company achieved topline growth, recording Rs63.1bn in 9MFY25 compared to Rs53.9bn in 9MFY24.

This growth was primarily driven by improved product pricing dynamics in USD terms and steady business volumes.

The surge in energy tariffs over the years, combined with stability in the USD exchange rate, has impacted the Company’s overall cost structure.

Elevated finance costs and an increased tax burden for export-oriented units following the transition from FTR to NTR further added to the pressure.

Despite this pressure, LML’s margins remained highly competitive within the industry.

The Company's focus on cost optimization through the implementation of renewable energy projects has benefited its core operations.

These projects include a 9MW wind turbine, a 3.56MW solar installation, and a 4MW battery storage system.

The Company maintains a sizeable investment portfolio through strategic stakes in the power sector.

It also holds mark-to-market equity investments in blue-chip companies, augmenting its liquidity profile through dividend income inflows and potential capital gains.

The Company's strategic focus on a well-defined niche of quality-conscious institutional buyers has led to a concentrated customer base and long-standing relationships with high-profile clients, particularly driven by its significant exposure to the U.S. market.

This also enables LML to effectively manage the impact of reciprocal US tariffs.

In cognizance of region-wise concentration, the management is pursuing opportunities to expand into new potential markets in Europe.

The financial risk profile of the Company is considered moderate, with a slightly stretched working capital cycle depicting the industry norm.

The cash flows and coverages of the Company are considered adequate.

The working capital requirements are mainly fueled through short-term borrowings.

The Company has maintained a leveraged capital structure dominated by subsidized borrowing from SBP.

The ratings are dependent on the Company’s ability to sustain its product diversity and volumetric growth while maintaining margins and profitability matrix at an optimal level.

The maintenance of the debt matrix and improvement in coverages, coupled with continuity in generating cash flows from core business operations, remain imperative for the assigned ratings.

LML is an unlisted, public limited company incorporated in 1964.

It is engaged in the business of manufacturing and processing textile fabrics and made-ups.

The company operates a spinning unit with 11,160 rotors/spindles, producing 1,700 bags per day.

It also runs Air Jet and Sulzer weaving units with 145 and 110 looms, respectively, having a combined production capacity of 130,000 meters of fabric per day at its Nooriabad and Karachi locations.

Liberty Group holds around 90% stake in Liberty Power Tech Limited (a 200MW thermal IPP), including about 29% through Liberty Mills Limited.

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