Press Release

JCR-VIS assigns Initial Ratings of Nadeem Textile Mills Limited

Karachi, March 12, 2018: JCR-VIS Credit Rating Company Limited (JCR-VIS) has assigned initial entity ratings of ‘BBB-/A-3’ (Triple B Minus/A-Three) to Nadeem Textile Mills Limited (NTML). Outlook on the assigned ratings is ‘Stable’.

NTML has been operating in the textile sector for about thirty three years since 1984. The company is primarily engaged in manufacturing and sales of yarn, for both local and international markets through two spinning units. The spinning mills are located in Nooriabad and Kotri, Sindh.

Rating assigned to NTML takes into account improvement in profitability and considerable sponsors support throughout the business cycles. Moreover, the company’s corporate governance has also been considered positively. The board composition is considered adequate in terms of regulatory compliance. Furthermore, in line with best practices and independent director chairs the Board Audit Committee.

NTML’s sales over the last three years have witnessed a slight shift from international to local market owing to unfavorable yarn prices in export market. During FY16 the comparatively old nature of machinery installed in Unit II led to limitation in quality of yarn, additionally negative trend of the industry further aggravated loss in FY16. Subsequently, quality issues have been addressed through addition/replacement of certain machinery. Furthermore, due to favorable price adjustments, profitability has witnessed recovery with minimal profits in FY17.

Sponsor support is exhibited by interest free loan extended to NTML by associates and a director of the company. This has led to leverage indicators being manageable. Gearing has improved to 1.4x (FY16: 1.6x) in FY17 on the back of advance against share capital. The same also led to decrease in leverage to 2.5x (FY16: 2.6x) in FY17. Going forward, the maintenance of loan from associates along with successful implementation of the Balancing, Modernization and Replacement (BMR) project is considered important in order to maintain the risk profile of the company.

For further information on this rating announcement, please contact the undersigned (Ext: 201) at 021-35311861-70 or fax to 021-35311872.


Javed Callea
Advisor

Applicable Criteria: Industrial Corporates (May 2016)

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