Press Release

VIS Reaffirms Entity Rating of Z.A. Corporation (Pvt.) Limited

Karachi, April 03, 2023: VIS Credit Rating Company Limited (VIS) reaffirms entity ratings of Z.A. Corporation (Pvt.) Limited (ZAC) at ‘BBB+/A-2’ (Triple B plus/A-Two).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. Outlook on the assigned ratings is ‘Stable’. Previous rating action was announced on March 08, 2022.

Z.A. Corporation (Pvt.) Limited (ZAC) is a medium-sized spinning unit located in Faisalabad. Shareholding of the company is vested with Sheikh Danish Ali who is actively involved in day-to-day affairs of the Company. Product portfolio comprises viscose and cotton yarn account for majority sales; however, the Company manages the counterparty risk by making sales on cash/advance basis. Business risk profile takes into account industry wide growth in sales over the last year; however, recent floods across the country, rising interest rates, inflationary pressures, lower availability of raw material availability (significant reliance on imported viscose) due to limited foreign exchange reserves, and higher electricity costs pose risks on the sector over the medium term.

Assessment of financial profile incorporates healthy revenue growth of around 47% during FY22 largely driven by higher average selling prices and incremental capacity commenced in the second half of outgoing year. Management expects gradual increase in the top line with ease in LC constraints over the remaining part of the ongoing fiscal year. Profitability margins on the other hand have shown weakening in the review period arising from higher input and finance costs. In line with the same, liquidity profile of the Company also depicts room for improvement. With profit retention, total debt level have reduced on timeline. Given no expansion plans in FY23, debt levels are expected to remain at similar levels. Ratings are constrained by current weak macroeconomic environment globally and locally.

Ratings are dependent on meeting projected growth targets and maintaining financial risk profile amidst challenging macroeconomic environment.

For further information on this rating announcement, please contact Ms. Asfia Aziz (Ext: 212) or the undersigned (Ext: 306) at (021) 35311861-66 or email at info@vis.com.pk.



Faryal Ahmad
Deputy CEO

Applicable Rating Criteria: Corporates (August 2021)
https://docs.vis.com.pk/docs/CorporateMethodology202108.pdf

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