Press Release

JCR-VIS reaffirms Entity Ratings of Sapphire Textile Mills Limited

Karachi, June 01, 2015: JCR-VIS Credit Rating Company Limited (JCR-VIS) has reaffirmed the entity ratings of Sapphire Textile Mills Limited (STML) at ‘A+/A-1’ (Single A Plus/A-One). Outlook on the assigned ratings remains ‘Positive’. The previous rating action was announced on March 5, 2014.

The ratings assigned to STML take into account the sound financial profile of the institution depicted by a conservative capital structure and comfortable debt servicing coverage ratios. STML is one of the prominent composite units in the country. The company’s continued investment in its production facilities is expected to improve STML’s competitive advantage in the value added segment. Meanwhile, company’s investment portfolio provides support to the revenues in the form of stable dividend income; strategic investment in power sector is expected to augment dividend income in the coming years.

Gross margins, particularly in the spinning sector remained depressed during FY14; STML was able to sustain the impact of the same to an extent on the back of higher margins in other segments. Going forward, margins in textile sector would remain a function of enhanced marketing efforts and efficient inventory management. With exports representing a major share in overall revenues, the company was able to maintain net sales volumes.

Leverage indicators increased moderately as additional long term borrowing was arranged for fabric finishing unit. Long term borrowings may increase further on account of additional investment in group companies. However, the capital structure is expected to remain strong on the back of healthy profit retention by the company and expected returns from the additional investments while ability to service debt in a timely manner is also expected to remain sound.

For further information on this rating announcement, please contact the undersigned or Ms. SobiaMaqbool, CFA (Ext: 604) at 021-35311861-70 or fax to 021-35311872.



JavedCallea
Advisor

Applicable Criteria: Industrial Corporates (October 2003)
http://www.jcrvis.com.pk/images/IndustrialCorp.pdf

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 June 01, 2015 VIS Credit Rating Company Limited. All rights reserved. Contents may be used by news media with credit to VIS.