VIS reaffirms entity ratings of Premium Textile Mills Ltd

June 04, 2025 (MLN): VIS Credit Rating Company Limited (VIS) reaffirms entity ratings of Premium Textile Mills Limited (PSX: PRET) at 'A-/A2' (Single A minus/A Two) with a “Stable” outlook.

Medium to long term rating of ‘A-' indicates good credit quality; Protection factors are adequate. Risk factors may vary with possible changes in the economy.

Short term rating of 'A2' indicates a good likelihood of timely repayment of short-term obligations with sound short-term liquidity factors. Previous rating action was announced on June 05, 2024.

PRET was incorporated in Pakistan in 1987 as a public limited company and is listed on Pakistan Stock Exchange Limited.

The principal activity of the Company is manufacturing and sale of socks, cotton and polyester yarn.

The company’s head office is located in Karachi while its manufacturing facility is located in Nooriabad.

Assigned ratings take into account the business risk profile of Pakistan’s textile spinning sector, assessed in the medium to high range.

The sector remains exposed to demand cyclicality, energy costs, and regulatory developments.

Challenges in the current cotton season, including pest issues and lower cultivation, increased reliance on imports.

A shift to alternative crops further constrained availability. Withdrawal of export incentives and tax regime changes led to substitution of local yarn with imports.

Rising energy and tax costs continue to affect performance.

The overall financial profile of the company, while exhibiting negative trends in FY24, has shown measurable improvement in the first nine months of FY25.

The Stable Outlook reflects expectations of continued metric recovery.

Revenue growth in FY24 was driven by higher sock segment volumes, though gross margins contracted amid input cost pressures.

In 3QFY25, margins stabilized via cost efficiencies from renewable energy adoption and supported by internal waste conversion.

Net margin improved as monetary easing reduced financial charges, with further gains anticipated amid declining interest rates.

Coverage ratios have also recovered because of the same while liquidity remains adequate, supported by operational cash flows.

Equity growth through profit retention partially offset leverage, though capitalization metrics remain a sensitivity and will remain a key rating consideration going forward.

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