Press Release

VIS Reaffirms Entity Ratings of Sohail Textile Mills Limited

Karachi, December 23, 2025: VIS Credit Rating Company Ltd. (VIS) has reaffirmed entity ratings of Sohail Textile Mills Limited (‘STML’ or ‘the Company’) at ‘BBB-/A2’ (Triple B Minus/A Two). The medium to 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. Short term rating of ‘A2’ denotes good likelihood of timely repayment of short-term obligations with sound short-term liquidity factors. Outlook on the assigned rating is ‘Stable’. Previous rating action was announced on December 2, 2024.

Assigned ratings reflect higher business risk encountered by textile exporters emanating from declining domestic cotton production, reliance on costly imports and persistent high energy costs, all having adverse impact on profit margins across the sector. Furthermore, inconsistent government policies have introduced additional pressures on demand of locally produced yarn. Moreover, global tariffs could further raise supply chain and cost-side challenges for textile companies in Pakistan.

STML's net sales moderated in FY25 due to subdued demand while elevated utility costs simultaneously drove down the gross margin. Net profit remained low despite a decrease in finance costs and taxes. Debt coverage weakened, a result of lower operating cash flows and debt repayments. Strain on liquidity was characterized by a prolonged cash conversion cycle and a marginally lower current ratio. However, gearing and leverage improved at end-FY25.

Management anticipates revenue generation and profitability will be driven from slight improvement in demand, cost-savings from solar energy initiatives, easing of supply-side pressure and lower interest rate environment. Sustained enhancements in profitability, debt servicing metrics, liquidity and capital structure will remain important from ratings perspective.

For further information on this ratings announcement, please contact at 021-35311861-64 or email at info@vis.com.pk

Applicable Rating Criteria: Corporates:
https://docs.vis.com.pk/docs/CorporateMethodology.pdf

VIS Issue/Issuer Rating Scale
https://docs.vis.com.pk/docs/VISRatingScales.pdf

Information herein was obtained from sources believed to be accurate and reliable; however, VIS Credit Rating Company Limited (VIS) does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. VIS, the analysts involved in the rating process and members of its rating committee do not have any conflict of interest relating to the rating(s)/ranking(s) mentioned in this report. VIS is paid a fee for most rating assignments. This rating/ranking is an opinion and is not a recommendation to buy or sell any securities. Copyright December 23, 2025 VIS Credit Rating Company Limited. All rights reserved. Contents may be used by news media with credit to VIS.