Press Release
VIS Reaffirms Entity Ratings of Bismillah Textiles Limited
Karachi, August 22, 2023: VIS Credit Rating Company Limited (VIS) has reaffirmed entity ratings of Bismillah Textiles Limited (BTL) at ‘BBB+/A-2’ (Triple B plus/A-Two). Medium to long-term rating of ‘BBB+’ reflects adequate credit quality coupled with reasonable protection factors; risk factors are considered variable if changes occur in the economy. Short term rating of ‘A-2’ indicates good certainty of timely payment supported by sound liquidity and company fundamentals. Access to capital market is good and risk factors are small. Outlook on the assigned ratings remains ‘Stable’. Previous rating action was announced on September 08, 2022.
Ratings are underpinned by BTL’s over three-decade-long operational history in manufacturing and export of value-added fabrics and home textile products, consistent efficiency enhancement initiatives, limited reliance on imported yarn, and strong customer base of global retailers and wholesalers. The reaffirmed ratings highlight sustained gross margins and a positive trend in cash-flow coverage metrics due to reduced utilization of running finance, as well as improved leverage ratios compared favorably with peers. However, recent global demand slowdown has impacted export volumes and sales revenues in FY23, while rising administrative overheads and high financial charges have led to thinner net margins. Improvement in the same is considered important from the ratings perspective. Business risk profile factors in the high-interest rate environment, inflationary pressures, rising raw material costs, ongoing energy crisis in the country, and a global slump in demand. The same is reflected in a ~15% year-on-year decline in Pakistan's textile exports in FY23, totaling USD 16.5b (FY22: USD 19.3b). Moreover, all these factors pose a challenge to the sector over the medium term in terms of margins sustainability and future growth. Ratings are constrained by the current weak macroeconomic environment both globally and locally.
Most revenue comes from exports, while local sales involve third-party processing services and wastage sales. Product-wise, home textile made-ups constitute roughly ~75-80% of total exports, with the rest being fabric sales. Made-ups largely include jacquards, embroidery, bed linen, kitchen accessories, bedcovers/bedspreads, curtains, quilt cover sets, table covers, napkins, chair pads, and more. Geographic sales are well-diversified, with no single country, except Poland, accounting for more than 20% of total exports. Major destinations include Germany, Argentina, US, Australia, Spain, Greece, the Netherlands, and others. Top ten clients consistently generate nearly three-fourths of total sales, reflecting sales concentration risk.
For further information on this rating announcement, please contact Mr. Muhammad Tabish (Ext: 206) or the undersigned (Ext: 207) at (021) 35311861-4 or email at info@vis.com.pk
Sara Ahmed
Director
Applicable Rating Criteria: Industrial Corporates (May 2023)
https://docs.vis.com.pk/docs/CorporateMethodology.pdf
VIS Rating scale
https://docs.vis.com.pk/docs/VISRatingScales.pdf