January 01, 2024 (MLN): Pakistan Credit Rating Agency Limited (PACRA) has maintained entity ratings of Kassim Textiles (Pvt.) Limited at “A-” for long term and “A2” for short term with a stable outlook forecast, the latest press release issued by PACRA showed.
Kassim Textiles (Private) Limited (Kassim Textile), the flagship company of the Machiyara group enjoys a long presence in the textile and allied industry along with several other sectors.
The company operates with 30,624 spindles, 3,304 rotors, and 364 looms.
Revenue is mainly driven by the manufacturing and sale of yarn and fabric and having a portfolio of strategic investments in its subsidiary Kassim (Private) Limited.
Revenue of the company registered clocked at Rs22.2 billion in FY23 (FY22: Rs22.1bn); reflecting the raise in price could only offset the challenge on the volume side.
The primary source of revenue is denim cloth, with sales extending to various destinations. The company maintains a stable customer base both locally, with a presence in Karachi and Lahore, and internationally, including exports to Turkey, Bangladesh, Cambodia, Greece, and other locations.
Marketing and administrative expenses increased in tandem with current inflationary trends. The company, facing challenge from inflationary pressures, was unable to absorb in the price structure. Consequently, there was a decline in margins.
This, in turn, impacted the company’s profitability, which stood at Rs391 million in FY23 (FY22: Rs1.3bn). The liquidity and coverage profile depicts deterioration on account of the widening working capital gap, increased short-term debt utilization, and constrained cash generation.
Going forward, with better efficiency and a specialized product profile, the management expects Kassim Textile’s profitability and margins to improve.
The company supplies to many downstream export-oriented units in Pakistan which are anticipating a rebound in global demand.
During FY23, textile exports were valued at $16.5bn as against $19.33bn, reflecting a 15% year-on-year decline – a downward trend seen since the beginning of FY23.
Exports declined due to higher energy prices, cotton shortages, and uncertainty in foreign exchange rates. Taming the demand represented by export routes was also a challenge.
During FY23, value-added products such as knitwear, bedwear, towels, and ready-made garments saw an annual decline of 13%.
Basic textiles, including raw cotton, cotton yarn, and cotton fabrics, declined by 21% year-on-year. During the month of June 2023, cotton yarn exports increased by 7% MoM. Value-added exports reported volume growth of 16% on a month-on-month basis.
The ratings are dependent on sustaining the business profile of the company by maintaining profitability and margins achieved from core textile operations.
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