Press Release

VIS Maintains Entity Ratings of J.K Spinning Mills Limited

Karachi, May 19, 2023: VIS Credit Rating Company Limited (VIS) has maintained entity ratings of J.K Spinning Mills Limited (JKSM) at ‘A-/A-1’ (Single A Minus/A-One). Medium to long-term rating of ‘A-’ reflects good credit quality, with adequate protection factors. Risk factors may vary with possible changes in the economy. Short-term rating of ‘A-1’ indicates high certainty of timely payment, liquidity factors are excellent and supported by good fundamental factors. Risk factors are minor. Outlook on the assigned ratings has been revised from ‘Positive’ to ‘Stable’. Previous rating action was announced on April 26, 2022.

Revision in rating outlook reflects current weak macroeconomic environment both globally and locally as well as weakening of financial performance indicators of the company in the current fiscal year. Business risk profile takes into account industry wide growth in exports over the last year; however, recent floods across the country, high interest rate situation, inflationary pressures, higher electricity costs and demand slow down pose risks on the sector over the medium term. In addition, high cyclicality and competitiveness in the spinning sector also adds to the business risk. Ratings take note of recent expansion project in the spinning division, which involved setting up a new Unit-4 with 52,896 spindles, bringing the total number of spindles to over 200K. Machinery required for the project was imported and funded by TERF & LTFF facilities of Rs. 2.5b, while total project cost has risen by roughly ~20% from the initial estimation to Rs. 5b, primarily due to escalating construction and material expenses. The project has a 60:40 debt to equity mix. With production set to begin in June’23, management aims to achieve ~40% growth in yearly sales by targeting local yarn market.

With a 60:40 proportionate share of exports to local sales over the past 3 years, yarn sales make up more than half of the revenue mix, while made-ups and fabric sales follow. The company mainly provides yarn to lawn manufacturers locally, while processed fabric and made-ups such as bed linen, curtains, table linen, patient gowns, scrub suits, hospital and hotel sheeting are exported to US and European markets. Export sales have a high concentration of clients, while local sales are diversified. It is pertinent to note that the company achieved record high bottom-line during FY22 due to sizeable revenue growth and jump in profitability margins. However, the same depicted noticeable contraction in the current year, highlighting a contrasting trend, which significantly impacted cash flow generation. Going forward, improvement in financial performance metrics specifically margins is important for sustenance of ratings.

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

Sara Ahmed

Applicable Rating Criteria: Industrial Corporates (August 2021)

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