July 18, 2023 (MLN): Pakistan Credit Rating Agency Limited (PACRA) has maintained entity ratings of Nimir Resins Limited (PSX: NRSL) at "A-" for the long term and "A2" for the short term with a stable outlook forecast, the latest company’s filing to the bourse showed.
The company has primarily three production lines, catering to different industries of the economy.
NRL also furnishes synergistic benefits and also other efficiency due to being owned and operated by the Nimir Group.
Demand drivers of these industries are closely linked with economic growth and construction/ infrastructure developments.
During 10MFY23 (July-April) Large Scale Manufacturing (LSM) reported a decline of 9.3% as compared to the same period last year, on the other side construction industry also registered a negative growth of 5.5% in 9MFY23.
The economy is facing immense challenges due to rising inflation/interest rates and massive rupee depreciation which resulted in an unprecedented increase in the cost of doing business.
The top line of the company registered a positive growth of 15% during 9MFY23, mainly due to price inflation. However, margins showed some dilution at all levels.
The operations of NRSL benefited from a modern manufacturing facility and robust control environment.
The financial risk profile of the company is characterized by moderate coverages, cashflows, and stretched working capital cycle which depicts the industry norm.
Capital structure is moderately leveraged where borrowings are mainly comprised of short-term to meet the working capital requirements.
The policy rate has been increased up to 22%, further elevating the debt service cost in the future.
Going forward, growth in business would necessitate prudent management of margins, debt mix, and sufficient internal capital formation.
The ratings take comfort from the NRL’s association with Nimir Group of Companies and are dependent on sustainable growth in the top-line and bottom-line with upheld margins, and market share while retaining sufficient cash flows and coverages.
However, prudent financial management and maintaining sufficient liquidity under stressed economic conditions will remain important for ratings.
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Posted on: 2023-07-18T11:10:12+05:00
