December 10, 2018 (MLN): Pakistan Credit Rating Agency (PACRA) has maintained entity ratings of Ahmed Fine Weaving Limited at ‘BBB+’ for Long-term and ‘A2’ for Short-term, with a stable outlook forecast.
The ratings reflect modest business profile of Ahmed Fine Weaving Limited – independently owned by a family stream belonging to erstwhile Fazal family of Multan. The sponsor’s long association with the textile business is considered positive.
During recent years the company’s sales mix has shifted towards local sales. Meanwhile, the company’s declined margins has limited its profitability.
Moreover, re-imposition of custom duties and sales tax on cotton & yarn imports, coupled with increasing interest rates has stretched the textile industry. On standalone basis, the rupee devaluation has provided a requisite breather to the company to sustain its business margins, despite declining export sales.
The management is cognizant of this and intends to strengthen its performance by expanding volumes. For the purpose the company is continuously in process of BMR activities. The expansion projects have been financed through LTFF, with comfortable debt servicing cycle.
The ratings are dependent on the company’s ability to improve its margins and maintain prudent working capital and financial profile. Any negative movement in margins, impacting profitability in turn, cash flows, will negatively impact the ratings. Improvement in governance framework is important.
