Sargodha Jute Mills margins likely to suffer as currency devaluation affects jute industry: Pacra

December 21, 2018 (MLN): Pakistan Credit Rating Agency (PACRA) has assigned initial entity ratings to Sargodha Jute Mills Limited. The long-term rating is ‘A-’ whereas short-term rating is ‘A2’, with a stable outlook forecast.

According to PACRA, the ratings reflect Sargodha Jute Mills Limited’s strong business profile in harmonization with jute industry dynamics in recent times. Pakistan’s jute industry depends 100% on raw jute imports from Bangladesh. Recent devaluation in currency has increased import cost of raw jute. The increase in cost is passed gradually, hence margins of the industry may be affected.

The overall profitability of the company has showcased a healthy trend as the Company has ~40% market share and enjoys a strong repute in the jute industry of Pakistan.

The rating is dependent on the Company’s ability to sustain its business profile and continue to hold its position in the jute industry. At the same time, diversification in revenues and products is critical. Substantial decrease of margins leading to lower profits and excessive leveraging will have its implications on the ratings.

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