Press Release
VIS Reaffirms Entity Ratings of Syntronics Limited
Karachi, April 08, 2024: VIS Credit Rating Company Limited (‘VIS’) reaffirms entity ratings of Syntronics Limited ('SL' or ‘Syntronics’ or 'the Company') to 'BBB+/A-2' ('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 'A-2' indicates good certainty of timely payment. Liquidity factors and company fundamentals are sound. Access to capital markets is good. Risk factors are small. Outlook on the assigned ratings remains 'Stable'. Previous rating action was announced on May 15, 2023.
Syntronics Limited was incorporated in 1998 as a Public Company and is principally engaged in manufacturing of Hermetically Sealed Laminated Polypropylene Woven Sacks and has recently installed a printing unit for Biaxially Oriented Polypropylene (BOPP) which manufactures flexible stitched bags for packaging flour and rice and FFS reel for the FMCG sector. The head office of the Company is located at 20-A Markaz F-7, Islamabad while the registered office is situated at plot no. 13-16 no. 1, Phase I, Industrial Estate, Gadoon Amazai, Khyber Pakhtunkhwa. The Company’s primary sponsors are the ‘Premier Group’ which has exposure mainly in the sugar industry. Moreover, the Company has a 12.5% shareholding in its associated company, Chashma Sugar Mills Ltd.
Assigned ratings incorporate the medium to high business risk profile of SL within the packaging sector in Pakistan. This profile is characterized by market fragmentation, economic cyclicality, and vulnerability to foreign exchange rates due to reliance on imported materials. The sector faces fragmented competition among medium-sized enterprises, leading to competitive pricing pressures. Additionally, SL's dependency on the cement sector exposes it to economic cyclicality, while reliance on imported raw materials subjects it to foreign exchange rate vulnerabilities. Moreover, the Company is exposed to significant client concentration risk, which is partly mitigated by its long-standing relationship with its customers.
Assigned ratings also consider the financial risk profile of the Company. Despite demand constraints, the Company's topline growth was supported by price adjustments to offset rising costs in FY23. Gross margins benefited from inventory gains, while net margins were constrained by escalating finance costs during the period. Meanwhile, the coverage metrics have improved to adequate levels, supported by increased operational cash flows. The capitalization profile remains adequate, although a slight deterioration is noted due to short-term debt drawdowns in 6MFY24. The liquidity profile, historically stable, remains within satisfactory levels, commensurate with assigned ratings.
Going forward, ratings will remain sensitive to further improvement in the Company’s profitability and coverage metrics. Moreover, enhancement of its capitalization and liquidity metrics will also be important considerations for future reviews.
For further information on this ratings announcement, please contact 021-35311861-64 or email 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