Lahore, September 03, 2019 (PPI-OT): The assigned ratings of AL Textile (Pvt.) Limited (AL Textile) reflect strong financial profile of Sponsors and their support to the entity in the form of guarantee and subordinated loan. The Company mainly caters to the need of local market and has developed brand based clientele over the years. The Company’s revenue has witnessed growth in harmonization with textile industry in the past. However, the top line remain stagnant during FY19.
The relatively smaller capacity of AL Textile has limited its margins. Recently, the Company’s margins and profitability have come under pressure on the back of higher input and finance costs, leading to net loss in FY19. The imposition of sales tax on local sales is expected to have a negative effect on local demand. However, favourable government policies towards textile industry, subsidized utilities, and rupee depreciation is expected to bode will for export-oriented textile players.
While incorporating these factors, the Company expects its business profile to improve in near future. The Company has a moderately leveraged capital structure characterized by adequate coverages and moderate inventory days. The management intends to implement further financial discipline by limiting leveraging. The ratings take comfort from explicit commitment of sponsors to provide support to the Company.
The ratings are dependent on the Company’s ability to improve its margins and financial profile. Any further reduction in margins, impacting cash-flows and profitability for a long period will impact the ratings. Similarly, prudent working capital management is considered important. Going forward, sponsors support to the Company would remain critical for the 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