Press Release
JCR-VIS Reaffirms Entity Ratings of Sadaqat Limited at A-/A-2
Karachi, March 16, 2012: JCR-VIS Credit Rating Company Limited (JCR-VIS) has re-affirmed the entity ratings of Sadaqat Limited (SL) at ‘A-’ (Single A Minus) for medium to long-term and A-2 (A Two) for short-term. Outlook on the medium to long-term rating is ‘Stable’.
After significant improvement in profitability during FY11, the textile sector has faced stress in the on-going year on account of weak demand. In the backdrop of challenges faced by the sector, the performance of SL has shown resilience.
Net sales, primarily comprising exports, have depicted steady growth over the last few years. The management has enhanced focus on marketing effort to achieve geographic and customer diversification in order to mitigate risk of high concentration in sales. Moreover increased sales of a differentiated fabric are also expected to help in the same. Gross margins have witnessed a slight decline in FY11 and 1H12; however, net margins improved during the on-going year with lower operating expenses and financial charges.
Capitalization levels have improved on account of retained profits. This along with lower utilization of short-term borrowing lines has resulted in improved debt leverage in the on-going year. Additional capex of Rs. 300m is planned for FY12 which is being funded through a mixture of debt and equity. A large portion of the same pertains to rotary printing machine which will double the printing capacity and lead to a one-third enhancement in the company’s overall capacity. The company is expected to sustain pressure on margins, if debt levels are maintained within prudent limits.
For further information on this rating announcement, please contact Mr. Rashid Zahir (rashid.zahir @jcrvis.com.pk) or Mr. Maimoon Rasheed 042-36610681-84.
Jamal Abbas Zaidi
Deputy CEO