Press Release

VIS reaffirms Entity Ratings of Feroze1888 Mills Limited

Karachi, November 13, 2019: VIS Credit Rating Company Limited (VIS) has reaffirmed entity ratings of Feroze 1888 Mills (‘FML’ or ‘the Company’) at ‘AA-/A-1’ (Double A Minus/A-One). The medium to long-term rating of ‘AA-’ denotes high credit quality coupled with strong protection factors. Moreover, risk factors may vary slightly with possible changes in the economy. The short-term rating of ‘A-1’ denotes high certainty of timely payment, liquidity factors are excellent and supported by good fundamental protection factors. Outlook on the assigned ratings is ‘Stable’. The previous rating action was announced on November 12, 2018.

Feroze1888 Mills Limited (FML) is a public listed company and one of the largest terry textile exporters of Pakistan. The Company is a vertically integrated entity engaged in end-to-end process from spinning to product packaging.

In FY19, FML’s operational performance depicted notable improvement; the Company’s topline grew by 34%, whilst significant uptick was also noted in operating margins. The improved earning profile can be attributed to the volumetric growth, enhanced efficiency and cost control measures with the same being supported by the sharp devaluation in local currency.

As the Company continues to invest in balancing, modernization and capacity enhancement, both gearing and leveraging have increased; nevertheless, remain comfortably within VIS benchmarks, while debt servicing coverage is considered very strong. Being an exporter, the Company avails debt at significantly subsidized rates, as a result of which the Company has not been affected by the sharp uptick in benchmark rates. Given a strong earning capability and prudent profit retention, we expect gearing levels to remain within VIS benchmarks for the assigned rating.

The assigned rating also takes into account, FML’s association with the US-based 1888 Mills, which allows the Company with a competitive advantage in terms of outreach in the US market. At present sales revenues depict significant reliance on the US. Cognizant of its sales concentration in the US market, FML has embarked upon diversification of the exports towards other countries, such as Australia, Canada, UAE, UK & Europe.

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


Javed A. Callea
Advisor

Applicable Criteria: Industrial Corporates (May 2016)

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