Press Release
VIS Maintains Entity Ratings of Metco Textile (Pvt) Limited
Karachi, May 7, 2021: VIS Credit Rating Company Limited (VIS), while maintaining the entity ratings of ‘A-/A-2’ (Single A Minus/A-Two) assigned to Metco Textile (Pvt) Limited (MTL), has placed the same on ‘Stable’ outlook from ‘Rating Watch-Developing’ status. Long Term Rating of ‘A-’ reflects good credit quality with adequate protection factors. Risk factors may vary with possible changes in the economy. Short Term Rating of ‘A-2’ signifies good certainty of timely payment, sound liquidity factors and company fundamentals, and good access to capital markets. Risk factors are small. Previous rating action was announced on April 16, 2020.
The revision in rating outlook draws comfort from the strong post-COVID recovery of the textile sector on the back of higher export orders resulting from countries more severely affected by the lockdowns. This is further supported by the government’s efforts to boost the industry by offering concessionary financing, loan deferments, and subsidies for power cost to provide positive momentum to revenues and profitability.
Ratings also draw comfort from the recovery of volumes in H1’FY21 following a 14% decline in the topline during FY20 owing to the pandemic. Net margins in FY20 were impacted due to higher operating expenses and increased financial charges; however they exhibit improvement in the first half of FY21. Going forward, volumes and margins are expected to improve on the back of international recovery and higher yarn prices; however, VIS will continue to monitor margins for sustainability on a timeline basis. .
Cash flow coverage and capitalization indicators remained under pressure during FY20, majorly on account of lower profitability and higher debt utilization. Resultantly, liquidity profile of the company depicted decline, albeit remaining within manageable levels. However, the same has stabilized during H1’FY21 and expected to improve upon improving topline and increasing margins. Going forward, company will increase quantum of long term debt on account of the undergoing capital expenditure which aims to achieve product diversification and operational efficiencies. We expect capitalization indicators to remain elevated till projects come online; VIS will closely monitor changes and take actions accordingly.
For further information on this rating announcement, please contact Ms. Sara Ahmed (Ext: 207) or Mr. Javed A. Callea (Ext: 201) at (021) 35311861-66 or email at info@vis.com.pk.
Saeed Khan
Executive Director Finance
Applicable Criteria: Industrial Corporates (May 2019)
http://vis.com.pk/kc-meth.aspx