Press Release

VIS Maintains Entity Ratings of Metco Textiles Private Limited

Karachi, November 6, 2024: VIS Credit Rating Company Limited (VIS’) has maintained the entity ratings of Metco Textile Private Limited (“MTPL” or “the Company”) at ‘A-/A2’ (Single A minus/A-Two). Medium to long term rating of 'A-' indicates good credit quality; protection factors are adequate. Risk factors may vary with possible changes in the economy. Short-term rating of 'A2' suggests good likelihood of timely repayment of short-term obligations with sound short-term liquidity factors. Outlook on the assigned ratings remains ‘maintained’. Previous ratings action was announced on October 06, 2023.

MTPL, incorporated in 2008, is a private limited company primarily engaged in the spinning of yarn for the local market & export. The product line includes various types of yarn such as cotton carded ring spun yarn, CVC yarn, PC yarn and open-end yarn for the weaving and knitting industry. The Company has four yarn manufacturing units two units for cotton carded ring spun yarn, one unit for CVC & PC yarn and one unit for open-end yarn with total spindle count of about 59,840 at end-of FY24. The Company’s head office is located in Karachi while the manufacturing unit is situated in Nooriabad, near Karachi.

Assigned ratings consider the medium-to-high business risk profile of the textile sector in Pakistan. Industry dynamics reflect exposure to economic cyclicality, global competition, and geopolitical challenges, particularly impacting export-oriented businesses. Business risk is further influenced by local and international economic conditions, and dependency on imported raw materials, creating vulnerabilities related to exchange rate volatility and import restrictions. In addition, delays in government sales tax refunds contribute to liquidity pressures. Supply-side constraints, including domestic cotton production levels, also impact profitability and margins within the sector.

Assigned ratings also consider the Company’s financial profile. Profitability growth in FY24 was driven by increased sales volumes, with demand from weaving mills and CVC customer segments boosting revenue. However, elevated input costs, particularly fuel and power costs, affected the gross margin. Capitalization displayed a reduction in gearing levels due to lower short-term debt utilization, although leverage increased as the Company managed its working capital through management of the cash conversion cycle. Coverage indicators, including DSCR and FFO ratios, show improvements driven by higher funds from operations, supported by higher non-cash expenses. Although the current ratio has decreased due to an increase in the current portion of debt from elevated long-term borrowings for capital expenditure requirements, it remains commensurate with assigned ratings.

Going forward, ratings remain sensitive to the Company’s ability to manage net margins amid elevated finance costs and input price pressures though likely interest rate reductions are expected to positively influence net margins, aiding in finance cost reduction.

For further information on this ratings announcement, please contact on 021-35311861-64 or email at info@vis.com.pk.









Applicable Rating Criteria:
Industrial 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 .