VIS revises outlook of Al-Karam Textiles Mills from ‘Rating Watch-Negative’ to ‘Stable’

March 4, 2021: VIS Credit Rating Company (VIS) has maintained the entity ratings of Al Karam Textiles Mills Private Limited (AKTMPL) at ‘A/A-2’ (Single A/A-Two).

 Outlook on the ratings has been revised from ‘Rating Watch-Negative’ to ‘Stable’. Long term rating of ‘A’ signifies good credit quality; protection factors are adequate. Risk factors may vary with possible changes in the economy. The short-term rating of ‘A-2’ signifies good certainty of timely payment; liquidity factors and company fundamentals are sound. Access to capital markets is good. Risk factors are small. The previous rating action was announced on April 24, 2020.

Incorporated in 1986 as a private limited company, AKTMPL is principally engaged in manufacturing and sale of textile products. It is a vertically integrated company with diverse product portfolio including a variety of yarn ranging from coarse to fine counts, home textiles, institutional textiles and garments. Manufacturing facility of the company is situated in Landhi Industrial Area.

The revision in rating outlook takes into account growth in overall Pakistan’s textile sector exports post ease in COVID-19 lockdown measures. Local textile export players have benefitted at the expense of competitors from the neighboring countries which have experienced effects more severe effects on account of supply chain disruptions due to COVID-19. Recovery in the industry’s exports support the business risk profile of the company.

Net sales of the company have witnessed noticeable growth in FY20 in comparison to the preceding year primarily on account of increase in average selling prices. Given the healthy order book of the company, topline is expected to depict healthy growth going forward.

Gross margins have shown improvement in HFY21 vis-à-vis the corresponding period in the preceding years on account of volumetric sales growth due to greater increase in prices vis-à-vis costs. Increase in topline has also translated to significant improvement in net profitability during 1HFY21 in comparison to the corresponding period in the preceding year. Leverage indicators continue to remain elevated due to increasing utilization of low cost (LTFF and TERF) borrowing to improve product quality.

Overall liquidity profile of the company is considered adequate in view of sufficient cash flows in relation to outstanding obligations and satisfactory debt servicing ability.

VIS