Lahore, February 21, 2019 (PPI-OT): The ratings reflect Maqbool Textile Mills Limited’s (Maqbool Textile) track record and association with Maqbool Group, an established group with presence in textile and seed oil extraction industry. Despite challenging textile industry dynamics, Maqbool Textile managed to maintain its capacity utilization. The commoditized nature of spinning products keeps margins in check due to strong competition in local and international markets. Sales volume declined in 1QFY19, however these are expected to normalize in near future.
Recent withdrawal of custom duty and sales tax on cotton imports, coupled with subsidized gas rates for textile industry has made the local textile industry cost competitive. On standalone basis better industry dynamics may nourish the Company’s margins, and eventually better cash flows generation to settle debts related obligations.
The Company’s margins remain on the lower side when compared with peers resulting in relatively subdued profitability. Maqbool Textile is in process of capacity enhancement for fixed cost optimization and better efficiency. The financial profile of the company is constrained due to high leverage and adequate coverages. The debt structure is skewed towards short-term borrowings, which may lead to the asset-liability mismatch.
The ratings are dependent upon the management’s ability to improve margins, profitability and financial profile of the Company. This includes avoiding any asset-liability mismatch that may arise and effectively managing its position in a competitive segment. Any deterioration in debt coverages leading to higher financial risk or subdued profitability will have a negative impact on ratings.
For more information, contact:
The Pakistan Credit Rating Agency Limited (PACRA)
Awami Complex, FB1, Usman Block New Garden Town,
Lahore – Pakistan
Tel: +9242 586 9504 -6
Fax: +9242 583 0425
Category: General Business News