Press Release

VIS Reaffirms Entity Ratings of Gadoon Textile Mills Limited

Karachi, December 09, 2024: VIS Credit Rating Company Ltd. (VIS) has reaffirmed entity ratings of Gadoon Textile Mills Limited (‘GADT’ or ‘the Company’) at ‘A+/A1’ (Single A Plus/A One). The medium to long term rating of ‘A+’ signifies good credit quality; Protection factors are adequate. Risk factors may vary with possible changes in the economy. Short term rating of ‘A1’ denotes strong likelihood of timely repayment of short-term obligations with excellent liquidity factors. Outlook on the assigned rating is ‘Stable’. Previous rating action was announced on October 31, 2023.

GADT, established in 1988, is engaged in the sale of yarn, knitted bedding products, dyeing services and milk. As a public listed company, it adheres to strict corporate governance standards, which is incorporated in assigned ratings. GADT is part of Yunus Brothers Group (YBG), a well-established conglomerate in Pakistan. The sponsor profile has also been incorporated in the ratings. The Company generates recurring dividend income, from long-term investments in associated companies, complimenting profitability profile. Installed capacity and actual production has increased over the years. The Company’s head office is located in Karachi while the manufacturing units are situated in Karachi and Swabi.

The business risk associated with Pakistan's textile sector is marked by significant exposure to economic cyclicality and fierce competition. Specifically, the sector's performance is heavily influenced by the broader economic conditions of the country, making it particularly susceptible to demand fluctuations. The growth of textile exports remains contingent on global economic conditions and geopolitical issues. Moreover, recent tax changes and rising utility costs on the domestic front may hinder the competitiveness of Pakistani textile exports.

Ratings take into account highest net sales achieved by GADT due to increased volume and higher prices, however gross margins were squeezed by rising fuel and energy costs, impacting the bottom line further eroded by elevated financial charges. Weakened profitability led to a decline in debt coverages during FY24. Additionally, liquidity profile was impacted by decline in current ratio. However, financial risk was mitigated by the Company's adequate capital structure, characterized by improvement in gearing and debt leverage.

Assigned ratings will remain sensitive to considerable improvement in profit margins and debt coverages during the ongoing year.

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