Press Release
VIS Maintained Entity Ratings of Kohinoor Mills Limited
Karachi, November 08, 2024: VIS Credit Rating Company Limited (‘VIS’) has maintained the entity ratings of Kohinoor Mills Limited (‘KML’ or ‘the Company’) at ‘BBB+/A2’ (Triple B Plus/A Two). Medium to long term rating of 'BBB+' indicates adequate credit quality; protection factors are reasonable and sufficient. Risk factors are considered variable if changes occur in the economy. Short-term rating of 'A2' suggests good likelihood of timely repayment of short-term obligations with sound short-term liquidity factors. Outlook on the assigned ratings has changed to ‘Stable’ from ‘Positive’. Previous ratings action was announced on August 30, 2023.
Incorporated in 1987, KML is a public limited company listed on Pakistan Stock Exchange Limited. The Company is principally engaged in the business of textile manufacturing including weaving, bleaching and dyeing of fabric. The Company is also in the business of trading in yarn, cloth and other goods made from raw cotton and synthetic fiber, as well as generation and supply of electricity. Production facilities and the registered office of the Company are situated at 8-K.M., Manga Raiwind Road, District Kasur while the marketing office is located in Karachi.
Assigned ratings take into account the business risk profile of the textile sector, which is characterized by a high level of exposure to economic cyclicality and intense competition. This sector's performance is significantly influenced by the broader economic conditions in the country, making it inherently vulnerable to fluctuations in demand driven by economic factors. The industry’s performance is closely intertwined with the outlook of the cotton and textile industries, both of which were affected in FY23 and FY24. Reduction in cotton supply, coupled with global economic slowdown and contractionary economic policies, led to a decrease in demand for textile products particularly cotton yarn. While the global outlook for cotton production is positive with expectation of rebound in production, local challenges persist. However, expectation for a better cotton crop in FY25 is likely to alleviate some pressure on input costs and margins.
Assigned ratings also consider the Company's profitability, capitalization, liquidity, and coverage profiles. Despite falling export volumes, revenue continues to grow, supported by increasing contribution of local sales. Profitability margins, however, margins have taken a hit during FY24 owing to increased raw material and energy costs as well as incidence of higher finance cost. Decline in profitability also led to contraction in cashflows, which negatively impacted the debt service coverage. Capitalization profile though remained largely intact. Going forward, achievement of projected profitability metrics and maintenance of capitalization profile will remain important for the assigned ratings.
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