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Karachi: JCR-VIS Credit Rating Company Limited (JCR-VIS) has reaffirmed the entity ratings of Indus Dyeing and Manufacturing Company Limited at ‘A/A-2’ (Single A/A-Two). Outlook on the medium to long term rating is ‘Stable’.
Given the rise in demand of textile products particularly yarn in the international markets, textile sector posted exceptional results in FY11. However, prices have fallen considerably since last quarter of the out-going financial year, imparting pressure on the sector. IDMCL had also posted strong results over the last two years. Increased sales together with strong profitability and margins translated into improved cash flows. Furthermore, retention of profits has allowed the company to augment its capitalization levels.
The reaffirmation of ratings takes into account future prospects for the industry given cyclical downturn in textile sector coupled with domestic issues such as energy shortages. Furthermore, IDMCL has embarked on expansion of its installed capacity, with another 16,672 spindles to be added to the production facilities. As part of this vision, MIMA Cotton Mills Limited (MCML) has been acquired for a consideration of Rs. 490m.
Moreover, the company is undertaking capital expenditure for improving the capacity and efficiency of manufacturing facilities and improving the quality of yarn. Over the near to medium term, IDMCL may have to provide funding to MCML, until the stand-alone financial profile of MCML improves. Some long term funding may need to be mobilized, going forward. If the company is able to turn around MCML and make it a profitable part of its business operations, while maintaining conservative capital structure, risk profile of the company may improve, going forward.
For more information, contact:
Mr. Javed Callea
Advisor
JCR-VIS Credit Rating Company Limited
Tel: +9221 35311861 (10 lines) (Ext: 501)
Fax: +9221 35311872-3
E mail: javed.callea@jcrvis.com.pk