Press Release

JCR-VIS Reaffirms Entity Ratings of Nishat (Chunian) Limited

Karachi, May 30, 2013: JCR-VIS Credit Rating Company Limited (JCR-VIS) has reaffirmed the entity ratings of Nishat (Chunian) Limited (NCL) at ‘A-/A-2’ (Single A Minus/A-Two). Rating of the privately placed term finance certificate of Rs. 500m has also been reaffirmed at ‘A’ (Single A). Outlook on the assigned ratings is ‘Stable’

Following stressed performance during FY12, sales of the company have shown an upward trajectory during the on-going year. Growing demand from the export markets alongwith higher yarn prices has augmented margins of the company. Improvement in margins is largely manifested in the spinning segment. Given that exports contribute more than two-thirds of the overall sales, devaluation in PKR is expected to be beneficial for the company. Moreover, improved dividend income from Nishat Chunian Power Limited, a 51.1% owned subsidiary of the company, continues to augment the profitability of NCL.

NCL has undertaken various expansion projects; additional spinning capacity of 22,000 spindles is expected to come online by end-CY13. While cyclicality in the prices of textile products is expected to persist, enhanced available capacity will allow the company to take advantage of uptick in demand, as is currently the case.

Given better margins, cash flows of the company have improved during the on-going year while debt service coverage ratio has also strengthened. With growing working capital needs of the company, short-term bank borrowings are expected to remain high particularly during the cotton procurement season. In addition to this, capacity enhancement is being mainly funded by further leveraging the balance sheet. Any unfavorable trend in margins combined with high debt leverage may place stress on the company’s debt servicing capacity.

For further information on this rating announcement, please contact Ms. Sobia Maqbool, CFA at 021-35311861-70 or Mr. Maimoon Rasheed at 042-36610681-84.



Javed Callea
Advisor

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