December 19, 2018 (MLN): JCR-VIS Credit Rating Company Limited (JCR-VIS) has upgraded the entity rating of Nadeem Textile Mills Limited (NTML) to ‘BBB/A-2’ (Triple B/A-Two) from ‘BBB-/A-3’ (Triple B Minus/A-Three). Outlook on the assigned ratings is ‘Stable’.
The long term rating of ‘BBB’ signifies adequate credit quality; protection factors are reasonable and sufficient. Risk factors are considered variable if changes occur 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 assigned ratings take into account adequate sponsor support, improvement in profitability, capitalization indicators and liquidity profile of the company. Ratings are constrained by high leverage indicators.
Product diversification, currency devaluation and volume growth provided a growing trend in sales in FY18 and Q1’19 vis-à-vis the corresponding periods in the preceding year. Product innovation coupled with currency devaluation resulted in improved gross margins in 2018. Besides the aforementioned factors, utilization of lower priced cotton inventory aided gross margins in Q1’19. Sustainability in margins in the given rating horizon would be an important rating determinant.
