Press Release
JCR-VIS Assigns Initial Entity Ratings to Umar Spinning Mills (Pvt.) Ltd
Karachi, February 13th, 2019: JCR-VIS Credit Rating Company Limited (JCR-VIS) has assigned initial entity ratings of ‘BBB+/A-2’ (Triple B+/A-2) to Umar Spinning Mills (Pvt.) Ltd (USMPL). Outlook on the assigned ratings is ‘Stable’. The long term rating of ‘BBB+’ signifies adequate credit quality; protection factors are reasonable and sufficient. Risk factors are considered variable if changes occur in the economy. The short term rating of ‘A-2’ signifies good certainty of timely payment. Liquidity factors and company fundamentals are sound. Access to capital markets is good. Risk factors are small.
Incorporated in 1991, USMPL became operational in 2003 and is primarily engaged in the manufacturing and sale of yarn to both local and foreign markets presently. The company is a part of Pervaiz Group of Companies which has presence in textile and clearing & forwarding business. Production factory of USMPL is based in Raiwand, Lahore.
The assigned ratings take into account moderate business risk profile due to volatility in cotton prices and currency exchange rates. Moreover, the ratings also incorporate satisfactory financial risk profile of the company on account of improving topline and profitability of the company on timeline basis coupled with adequate debt servicing ability.
USMPL’s net sales have increased at a Compound Annual Growth Rate (CAGR) of 20.0% over the past three years. The increase in net sales can be associated with an increase in average selling price along with volumetric growth. Around two third of total sales of the company cater to domestic market (including indirect export sales). Client wise concentration is considered to be on higher side but is partly mitigated by long term association with clients and customized products for clients. Improvement in gross margins has translated into higher net margins on timeline basis. Sustainability in margins and profitability in the given rating horizon would be an important rating determinant going forward.
Liquidity profile of the company is considered adequate in view of satisfactory cash flows in relation to outstanding obligations. Equity base of the company has depicted an increasing trend owing to profit retention. Although growing on timeline basis, leverage and gearing ratios remain at manageable levels. Maintaining leverage indictors at present level is considered important from rating perspective. Current ratio has observed a downward trend owing to increase in short-term borrowing; however the same is considered satisfactory as it remains above 1.0x. Stock in trade and trade debts provide adequate coverage for short term borrowings.
For further information on this rating announcement, please contact the undersigned (Ext: 207) at 021-35311861-71 or fax to 021-35311872-3.
Jamal Abbas Zaidi
Advisor
Applicable Rating Criteria: Industrial Corporates (May 2016)
http://www.jcrvis.com.pk/docs/Corporate-Methodology-201605.pdf