Press Release
VIS Reaffirms Entity Ratings of Sohail Textile Mills Limited
Karachi, October 19, 2022: VIS Credit Rating Company Limited (VIS) has reaffirmed the entity ratings assigned to Sohail Textile Mills Limited (SOT) at ‘BBB-/A-2’ (Triple B Minus/A-Two). The medium to long-term rating of ‘BBB-’ denotes adequate credit quality coupled with reasonable protection factors. Moreover, risk factors are considered variable if changes occur in the economy. The short-term rating of ‘A-2’ denotes good certainty of timely payments coupled with sound liquidity and company fundamentals. Outlook on the assigned ratings is ‘Stable’. Previous rating action was announced on September 8, 2021.
SOT is a part of Ayesha Group, which is one of the renowned players in yarn spinning industry of Pakistan. The assigned ratings take into account extensive experience of the sponsoring family, spanning nearly half a century and established relations with customers. The ratings incorporate notable growth in sales during the outgoing year driven by higher average yarn prices in line with covid led growth in textile industry of Pakistan. Gross margins decreased slightly while net margins were largely sustained owing to rationalized operating and other expenses. Liquidity position is underpinned by adequate cash flow coverages. Leverage indicators have remained high amidst high borrowings and small equity base. The ratings are constrained by small scale of operations, inherent cyclicality of spinning sector and volatility in cotton prices. Additionally, in the aftermath of recent floods in the country 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. The continuance of favorable regulatory regime for textile industry is imperative for the assigned ratings. The ratings will remain sensitive to improvement in gearing, sales and profitability profile and maintenance of adequate debt service coverages.
For further information on this rating announcement, please contact Ms. Tayyaba Ijaz, CFA at 042-35723411-13 (Ext. 8004) 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