Press Release

VIS maintains Ratings of Zephyr Textile Limited with ‘Rating Watch - Negative’ Status

Karachi, April 23, 2020: VIS Credit Rating Company Limited (VIS), while maintaining the entity rating of ‘BBB+/A-2’ (Triple B-Plus/A-Two) assigned to Zephyr Textile Limited (ZTL), has placed the same on ‘Rating Watch - Negative’ status. The medium to long-term rating of ‘BBB+’ denotes adequate credit quality coupled with reasonable protection factors. Moreover, risk factors are considered variable if changes occur in the economy. The short-term rating of ‘A-2’ denotes good certainty of timely payments. Liquidity factors and company fundamentals are considered sound. The previous rating action was announced on December 04, 2019.

ZTL is a textile weaving and finishing unit which is mainly engaged in the production and sales of grey & finished fabric, towel and textile made ups. ZTL has been making a gradual shift towards value-added textile products, particularly towel and finished fabric, which fetch comparatively better profit margins than grey fabric business. Resultantly, nearly half of total revenue now comes from towel exports.

With the advent of global Coronavirus disease (COVID-19) pandemic, the demand outlook for textile products in general and especially value-added, export-oriented units looks weak. Given increased proportion of exports in overall revenue mix and hence ZTL’s considerable dependence on exports sales for cash flows generation and servicing of its financial obligations, status of the assigned rating is therefore uncertain as an event of deviation from expected trend has occurred; additional information will be necessary to take any further rating action, warranting a ‘Rating-Watch’ status. With the demand compression emerging from ongoing global economic crisis and continued lockdown situation coupled relatively high financial risk profile vis-à-vis peer companies, ratings are being placed on ‘Negative’ outlook. The ratings are dependent upon maintenance of overall sales, market share in exports, profit margin, debt service coverage, and gearing ratios at an adequate level, with outlook subject to be reviewed once the situation stabilizes.

For further information on this rating announcement, please contact Syed Fahim Haider at 042-35723411-13 (Ext: 8006) or the undersigned at 021-35311861-70 (306) or mailto:info@vis.com.pk




Faryal Ahmad Faheem
Deputy CEO

Applicable rating criterion: Corporates (May 2019)
https://www.vis.com.pk/kc-meth.aspx

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