Press Release
JCR-VIS Reaffirms Entity Ratings of Sadaqat Limited at A-/A-2
Karachi, April 23, 2013: JCR-VIS Credit Rating Company Limited (JCR-VIS) has reaffirmed the medium to long-term entity rating of Sadaqat Limited (SL) at ‘A-’ (Single A Minus) and short-term entity rating at ‘A-2’ (A- Two). Outlook on the assigned rating is ‘Stable’.
The ratings take into account SL’s steady growth over the years as an export oriented company having a niche in value added fabrics and home textile. The management has undertaken regular business expansion, anticipating higher demand for quality products and foreseeing opportunity in recent years to tap dissatisfied clientele of some non-performing exporting units. SL has been effectively utilizing its resources with capacity utilization remaining above 90%. While the management has taken various initiatives to ensure smooth operations, energy related constraints remain major impediment towards cost rationalization.
SL has managed to maintain relatively higher margins vis-à-vis industry average on account of continued focus on value addition. Moreover, rupee devaluation against other major currencies has translated into larger positive impact for SL than most of its peers as it is a virtually 100% export oriented company. Concentration in sales improved on a timeline basis, though still remaining high. Going forward, SL aims to achieve further diversification by opening retail chain stores locally while tapping new customers in different countries.
With notable capital expenditure recently, sales along with bottom line registered considerable growth during 1H13. In spite of considerable capex, the company has managed to improve gearing levels during FY12 while maintaining these levels in 1H13. With higher cash flows generated during 1H13, FFO to total debt exhibited improvement on a timeline basis. During FY14, the company intends to procure Thermosol dying machine in order to minimize outsourcing. The related capital expenditure will be financed through a long-term loan, though leverage indicators are likely to remain within acceptable limits. Going forward, regular capex is expected to be financed through internal cash generation.
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