December 20, 2018 (MLN): JCR-VIS Credit Rating Company Limited (JCR-VIS) has reaffirmed the entity ratings of Sapphire Textile Mills Limited (STML) at ‘A+/A-1’ (Single A Plus/A-One). Outlook on the assigned ratings remains ‘Positive’.
According to the rating agency, long-term rating of A+ reflects good credit quality, adequate protection factors. Risk factors may vary with possible changes in the economy.
Short-term rating of A-1 indicates high certainty of timely payment, excellent liquidity factors supported by good fundamental protection factors and risk factors are minor.
The assigned ratings incorporate the company’s diversified business risk profile with exposure in textile and power sectors along with a sizeable portfolio of marketable securities.
Ratings also factor improvement in income from core operations with textile business posting healthy growth in profitability in FY18 and in the ongoing year.
As per JCR-VIS, leverage indicators and cash flow coverage of outstanding obligations are currently on the higher side but are expected to improve on the back of projected increase in profitability and net debt repayments over the rating horizon.
Positive outlook on the assigned ratings capture the timeline improvement in revenues, as projected and successful commissioning of 3x50MW wind power project- Tricon Boston Consulting Corporation (Private) Limited.
Materialization of dividend income along with projected improvement in financial indicators may result in upward push on ratings.
Within textile operations, value-added finishing segment remains the key focus area for the management.
Ratings remain dependent upon sustained profitability from textile segment, projected dividend payment from energy segment and containment of market risk in investments.
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