Press Release

VIS maintains Entity Ratings of Chakwal Textile Mills Limited
 

Karachi, April 02, 2021: VIS Credit Rating Company Ltd. (VIS) has maintained entity ratings of ‘BBB-/A-2’ (Triple B minus /Single A-Two) assigned to Chakwal Textile Mills Limited (DTML). Outlook on the assigned ratings has been revised from ‘Rating Watch-Negative’ to ‘Stable’. Long term rating of ‘BBB-’ signifies adequate credit quality with sufficient and reasonable protection factors. Risk factors are considered variable if changes occur in the economy. Short Term Rating of ‘A-2’ signifies good certainty of timely payment, sound liquidity factors and company fundamentals. Access to capital markets is good. Risk factors are small. Previous rating action was announced on April 27, 2020.

Chakwal Textile Mills Limited (CTML) Public Limited (unlisted) Company is primarily engaged in the business of textile spinning. The company produces different counts of polyester viscose yarn. The company has been providing PV yarn products mainly to local customers. The main raw material ‘Polyester’ is procured from the local market while other raw material ‘viscose’ is imported mainly from SABIC in Saudi Arabia. The cumulative power requirement of the unit is 2.5 MW which is met through WAPDA connection only. Capacity utilization levels declined during FY20 on account of production halt of 45 days due to imposition of Covid-19 lockdown.

Ratings also take into account moderate business risk profile supported by recovery in industry wise exports post ease in COVID-19 lockdown measures. With the objective of enhancing exports to support the economy, the Government of Pakistan (GoP), has provided incentives in the form of subsidized utility tariffs, loans on concessionary rates and sales tax refund to the textile industry. Even though impact of Covid-19’s third wave remains elevated, VIS expects the order book for the industry to remain strong in the ongoing year, easing our business risk concerns.

Assessment of financial risk profile incorporates one-off decline in profitability and liquidity indicators on account of COVID-19 led economic slowdown. However, recovery of the same has been noted during 1HFY21. Overall profitability profile of the company was impacted by higher raw material prices led by currency devaluation and disrupted production cycle due to Covid19 during FY20. During 1HFY21, margins of the company depicted improvement and are expected to further increase going forward on the back of projected gradual increase in demand and average selling prices. Liquidity profile of the company is considered adequate with satisfactory cash flow coverage of outstanding obligations. Liquidity indicators are expected to further strengthen in line with projected increase in overall profitability. Assigned ratings incorporate downward trend in leverage indicators on account of smaller debt base. Given plans to drawdown debt to finance BMR, capitalization indicators are expected to trend upwards; however the same are projected to remain within manageable levels.

For further information on this rating announcement, please contact Ms. Asfia Aziz or the undersigned (Ext: 306) at (021) 35311861-66 or email at info@vis.com.pk.




Faryal Ahmad Faheem
Deputy CEO

Applicable Rating Criteria: Industrial Corporates (May 2019)
http://vis.com.pk/kc-meth.aspx

________________________________________________________________________________________________________________________________
Information herein was obtained from sources believed to be accurate and reliable; however, VIS Credit Rating Company Limited (VIS) does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information.VIS , the analysts involved in the rating process and members of its rating committee do not have any conflict of interest relating to the rating(s)/ranking(s) mentioned in this report.VIS is paid a fee for most rating assignments. This rating/ranking is an opinion and is not a recommendation to buy or sell any securities. Copyright 2021 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .

VIS Credit Rating Company Limited