Press Release
VIS Reaffirms Entity Ratings of J.K. Spinning Mills Limited
Karachi, July 31, 2025: VIS Credit Rating Company Limited (‘VIS’) reaffirmed entity ratings of J.K. Spinning Mills Limited ('JKSM’ or 'the Company’) to 'A-/A1' (‘Single A minus/A One’). 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 'A1' indicates strong likelihood of timely repayment of short-term obligations with excellent liquidity factors. Outlook on the assigned ratings remain ‘Stable’. Previous Rating action was announced on August 08, 2024.
JKSM, is a vertically integrated facility located in Faisalabad producing fine yarn, fabric and home textiles. It is a part of the J.K. Group which also has ventures in the power, agri and IT sectors.
The assigned ratings incorporate the business risk profile of Pakistan’s textile sector, which is characterized by moderate to high risk. The sector remains exposed to economic cyclicality, competitive pressures in international markets, and persistent structural inefficiencies. Cotton output volatility, driven by adverse weather patterns, elevated input and energy costs, and declining cultivation area, continues to constrain supply. As a result, the industry relies significantly on imported cotton, which exposes it to international pricing and exchange rate fluctuations. Domestically, the sector faces margin compression from rising energy costs following recent gas price revisions and policy shifts such as the transition from Final Tax Regime to Normal Tax Regime. Despite these headwinds, value-added exports displayed resilience during FY24. The Company's operational profile is primarily influenced by international demand trends, with a significant proportion of weaving output being export-oriented. The yarn segment is driven by internal consumption and local market demand. In FY23, overall utilization levels remained subdued amid weak demand. In FY24, the removal of the Export Facilitation Scheme led to a decline in domestic yarn consumption, while partial recovery in global demand contributed to an improvement in utilization levels across spinning and weaving units.
Export-driven revenue streams remained the mainstay of topline performance. The Company benefited from favorable currency movements and incremental volumetric gains in FY24, although gross margin pressure was observed during 9MFY25 due to elevated manufacturing costs. Profitability levels were impacted by higher finance costs, primarily attributable to increased debt utilization and a high-interest rate environment. Capital structure witnessed pressure during FY24 on account of short-term borrowings used to finance temporary higher inventory levels, largely arising from delayed shipments from geopolitical reasons. Some moderation was noted in 9MFY25 due to repayments and working capital adjustments. Liquidity remained satisfactory as reflected in a consistent current ratio in line with historical averages. Coverage metrics experienced some stress owing to increased financial burden but remained within acceptable levels relative to the assigned rating.
Going forward, ratings will remain sensitive to the Company’s ability to maintain profitability margins amidst cost pressures and competitive challenges, with relief expected through lower financial charges. Sustained improvement in coverage metrics and further moderation in leverage indicators will be important.
For further information on this ratings announcement, please contact on 021-35311861-64 or email at info@vis.com.pk.
Applicable Rating Criteria:
Industrial Corporates
https://docs.vis.com.pk/docs/CorporateMethodology.pdf
VIS Issue/Issuer Rating Scale
https://docs.vis.com.pk/docs/VISRatingScales.pdf