Press Release

VIS Maintains Entity Ratings of Chakwal Textile Mills Limited with ‘Rating Watch-Negative’ Status

Karachi, April 27, 2020: VIS Credit Rating Company Limited (VIS) has maintained the entity ratings of Chakwal Textile Mills Limited (Pvt.) Limited (CTML) at ‘BBB-/A-2’ (Triple B Minus/A-Two). The assigned ratings have been placed on ‘Rating Watch-Negative’ status. The medium to long-term rating of ‘BBB-’ denotes adequate credit quality coupled with reasonable & sufficient protection factors. Moreover, risk factors may vary with possible changes in the economy. The short-term rating of ‘A-2’ denotes good certainty of timely payments. Liquidity factors and company fundamentals are considered sound and risk factors considered small. The previous rating action was announced on May 27, 2019.

CTML is a spinning mill specialized in the production of polyester viscose yarn of different counts mainly for wash & wear fabric. The company generates almost 100% sales through local customers. The main raw material ‘Polyester’ is procured from the local market while the other raw material ‘viscose’ is imported from Saudi Arabia. Shareholding is primarily vested with the sponsoring family who is actively involved in the day to day affairs of the company.

The revision in rating outlook reflects prevailing uncertainty in textile sector dynamics due to coronavirus outbreak, prolonged lockdown, overall contraction in demand, sharp fall in cotton prices and challenging economic environment. It is expected that the entire value chain of the textile industry will be impacted by these developments. 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. Aforementioned operating dynamics coupled with prevalent under-utilization of production facilities of the company warrant a ‘Rating Watch-Negative’ status. The ratings are dependent upon maintenance of overall sales, profit margins, 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 Ms. Maham Qasim at 042-35723411-13 (Ext. 8005) and/or the undersigned at 021-35311861-66 (Ext. 201) or email at 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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