Press Release
VIS Reaffirms Entity Rating of The Crescent Textile Mills Limited
Karachi, May 21, 2025: VIS Credit Rating Company Limited (VIS) has reaffirmed the entity ratings of The Crescent Textile Mills Limited (‘Crestex or the ‘Company’) to 'A-/A2' (‘A Minus/A Two’). 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 good likelihood of timely repayment of short-term obligations with sound short-term liquidity factors. Outlook on the assigned ratings remained ‘Negative’. Previous Rating action was announced on March 27, 2024.
Crescent Textile Mills Limited (CTM) is a public limited company incorporated in 1950 and listed on the Pakistan Stock Exchange. Based in Faisalabad, CTM operates a vertically integrated textile manufacturing setup covering spinning, weaving, processing, printing, and stitching; with two units located in Faisalabad and one in Haripur, KPK. The Company’s operations are structured across four primary segments: Yarn, Greige Fabric, Processed Fabric, and Home Textiles. The Company supplies to both local and international markets, with a notable portion of sales revenue derived from exports to Europe, North America, and other regions. Customers include retail chains, wholesalers, and institutional buyers.
The business risk profile of Pakistan’s textile sector remains a key consideration for Crestex’s assigned ratings, given its exposure to economic cyclicality and intense competition. Among the domestic factors, the sector continues to face demand volatility, rising production costs, and regulatory challenges, including the removal of subsidies and increasing energy costs. While global demand has shown some recovery post reduction in policy rates by the central banks (including US & Europe), competition from regional players & rising energy costs continue to dampen profitability.
The assigned ratings incorporate Crestex’s operational performance, marked by a 19% year-over-year (Y/Y) increase in revenue to PKR 23.75 billion in FY24, driven by improved sales volumes and favorable exchange rate movements. Export sales remained a significant contributor, accounting for approximately 70% of the total revenue mix, up from 60% in FY23. Geographic concentration remains moderate, with Europe and North America representing a sizable portion of export sales. The Company operates across various textile segments; however, home textiles and processed fabric continue to dominate the product portfolio. With the top 10 customers accounting for only 42% of total sales in FY24, the Company has limited exposure to client concentration risk.
While topline performance remained strong, profitability came under pressure amid rising input costs, elevated energy tariffs, and increased outsourcing expenses. Despite cost rationalization measures initiated by management, including operational restructuring and waste reduction, the efforts were insufficient to offset the impact of a high-cost environment. These pressures persisted into 9MFY25 as well, though partial margin recovery was noted. However, the Company continued to report losses during the period due to sustained cost-side challenges and weak demand in key segments.
The financial risk profile reflects weakened liquidity and increased reliance on short-term borrowings to meet working capital needs. Lower profitability and elevated finance costs resulted in negative cash flow from operations and stressed coverage metrics. Current ratio remained below unity, indicating stressed short-term liquidity. Although equity levels remain sizeable, the capitalization profile has come under pressure amid net losses. Management continues to prioritize cost control and energy efficiency initiatives to support margin recovery and improve cash flow. Moving forward, enhancements in operating margins, cash flow coverage, and financial discipline will be important factors for maintaining rating stability.
For further information on this rating announcement, please contact at 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