Press Release
VIS Assigns Initial Ratings to Pak Kuwait Textiles Limited
Karachi, Oct 20, 2022: VIS Credit Rating Company Limited (VIS) has assigned initial entity ratings of ‘A-/A-1’ (Single A Minus/A-One) to Pak Kuwait Textiles Limited (PKTL). The medium to long-term rating of ‘A-’ denotes good credit quality coupled with adequate protection factors. Moreover, risk factors may vary with possible changes in the economy. The short-term rating of ‘A-1’ denotes high certainty of timely payment, with excellent liquidity factors and supported by good fundamental protection factors. Outlook on the assigned ratings is ‘Stable’.
PKTL is primarily involved in manufacturing cotton and blended yarn for export-oriented textile units. The shareholding is vested with the family members while the ratings incorporate extensive experience of the sponsors in the textile industry spanning over more than four decades. The company’s topline exhibited sizeable growth during the last two years emanating from volumetric increase in sales due to the impact of merger with the subsidiary company along with increase in average yarn rates driven by covid led growth in textile industry of Pakistan. Profit margins remained robust on account of favorable product prices, economies of scale and rationalized expenses. Liquidity profile is considered strong in terms of cash flow coverages and working capital management. The company has low leveraged capital structure indicating strong risk absorption capacity. Meanwhile, the ratings factor in high cyclicality and competitive intensity of the spinning industry along with volatility in cotton prices. Additionally, in the aftermath of recent floods leading to cotton shortage, weakening demand of non-essential items in the local and international markets amid looming recession, may negatively impact the outlook of textile industry. Ratings will remain dependent on achieving projected sales and profitability while maintaining liquidity and capitalization profiles, going forward.
For further information on this rating announcement, please contact Ms. Tayyaba Ijaz, CFA at 042-35723411-13 (Ext. 8005) and/or the undersigned at 021-35311861-66 (Ext. 207) or email at info@vis.com.pk
Sara Ahmed
Director
VIS Entity Rating Criteria: Corporates (August 2021)
https://docs.vis.com.pk/docs/CorporateMethodology202108.pdf