Press Release

VIS Reaffirms Entity Ratings of Premium Textile Mills Limited

Karachi, June 05, 2024: VIS Credit Ratings Company Ltd. (VIS) has reaffirmed entity ratings of Premium Textile Mills Limited (‘PRET’ or ‘the Company’) at A-/A-2 (‘Single A Minus/A-Two’). Medium to long Term Rating of ‘A-’ reflects good credit quality; protection factors are adequate. Risk factors may vary with possible changes in the economy. 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. Outlook on the assigned ratings is ‘Stable’. The previous rating action was announced on August 18, 2023.

PRET was incorporated in Pakistan on March 03, 1987, as a public listed company and is listed on Pakistan Stock Exchange Limited. The principal activity of the Company is the manufacturing and sale of cotton and polyester yarn. During the year, the Company has established a Sock division which manufactures and sells Socks of different varieties under the management diversification plan.

Assigned ratings incorporate the constrained business risk profile of PRET, stemming from its exposure to economic cyclicality and intense competition within the spinning sector in Pakistan. The sector's vulnerability to fluctuations in demand driven by economic factors poses inherent risks to the entity's performance.

Assigned ratings also consider the Company’s financial risk profile. The profitability profile reflects declining gross and operating margins due to elevated input costs and inflationary pressures. Additionally, the capitalization profile is affected by increased gearing and leverage ratios resulting from higher debt levels for working capital and capital expenditure needs. The liquidity profile is deemed adequate, albeit with a slight decline in the current ratio and extended cash conversion cycle, influenced by economic slowdown and reduced offtakes. Furthermore, the coverage profile is weakened by subdued profitability and increased finance charges, leading to a decline in the debt service coverage ratio. Rating take note of the investment in Solar power generation for costs management and diversification into knitting for value addition and business risk diversification.

Going forward, ratings will remain sensitive to the Company’s ability to recover its eroded profitability, coverage, and improve its equity base to be commensurate with assigned ratings. Moreover, maintenance of the liquidity profile will also be a key consideration moving ahead.

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





Applicable Rating Criteria: Industrial 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 2024 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .