Press Release

VIS Maintains Entity Ratings of Best Fibres (Pvt.) Limited

Karachi, May 14, 2024: VIS Credit Rating Company Limited maintains entity ratings of Best Fibres (Pvt.) Limited ('BFPL' or 'the Company') at ‘A-/A-2’ (‘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 'A-2' indicates good certainty of timely payment. Liquidity factors and company fundamentals are sound. Access to capital markets is good. Risk factors are small. The outlook for assigned ratings has been changed to “Positive” from "Stable". Previous Rating action was announced on April 27, 2023.

BFPL is limited by shares, incorporated as a private limited company in Pakistan. The principal activity of the Company is manufacture and sale of yarn made from viscose staple fiber and cotton. The registered office and spinning unit of the Company is situated at 22-KM Sheikhupura road, Khurrianwala, Tehsil Jaranwala, District Faisalabad, Punjab.

Assigned ratings incorporate a constrained business risk profile attributed to the spinning sector’s susceptibility to economic cyclicality and growing competition. The spinning sector in Pakistan, comprising of over 400 mills, faced challenges from various economic and environmental factors, including crop damage by flooding and inflation in FY23. Prospects of cotton production in ongoing season are favorable as compared to last cotton season but still below expectations. However, the sector's performance is closely tied to broader economic conditions, rendering it vulnerable to demand fluctuations.

Change in outlook considers the Company’s stable financial risk profile, despite economic challenges in FY23. The profitability profile reflects sustained topline growth albeit demand constraints, attributed to increased selling prices. Meanwhile, while remaining suppressed compared to FY21, the Company's gross margins exhibited stability as increased cost pressures during FY23 were mostly passed on to the customer, preventing significant margin contraction. The capitalization profile is considered conservative with continued improvement in recent years supported by consistent equity expansion and decreased short-term debt drawdowns. BFPL also continues to maintain healthy liquidity and coverage profiles.

Going forward, ratings would remain sensitive to the Company’s ability to ease its client-concentration risk, while also improving its profitability and liquidity profiles to be in line with assigned ratings. Moreover, maintenance of its other key financial metrics commensurate with ratings will also be an important consideration for future reviews.

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



Applicable Rating Criteria: Corporates:
https://docs.vis.com.pk/docs/CorporateMethodology.pdf

VIS Issue/Issuer Rating Scale
https://docs.vis.com.pk/docs/VISRatingScales.pdf

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