PACRA Assigns Initial Entity Ratings to Gul Ahmed Textile Mills Limited

Lahore, March 05, 2018 (PPI-OT): The ratings reflect Gul Ahmed Textile Mills Limited’s (Gul Ahmed) established business profile with strong presence in the broader textile value-chain; enabling the company to manage volatility in textile business. Presence in retail with a renowned brand “Ideas” in local market adds up to stronger business risk. The entity has achieved a sizable revenue base, while focus on value added products brings higher gross margins. This emanates from export market orientation, targeting established niche of quality-conscious institutional buyers.

Nevertheless, this has led to customer concentration, longevity of relationship with big-name clients in addition to sustained quality would help manage the risk. Net margins are currently squeezed on the back of hefty branding activities and cut throat competition in local market. Gul Ahmed’s financial risk profile is relatively strained; characterized by higher long-term debt. However, it is supported by comfortable cash flows, and, in turn, adequate debt-servicing ability.

Working capital cycle is stretched on the back of higher inventory needs. Company revamped its production operations recently, replacing spinning and weaving facilities with latest technology. Moreover, retail strategy in local market has been invariably updated to cater changing demands amidst rising competition. These initiatives are expected to result in easing net margins, and, hence, improved cashflows.

The ratings are dependent on the company’s ability to sustain its business profile. At the same time, prudent management of its working capital needs and meeting financial obligations will remain important. Improving revenue stream while its margins will provide breather to coverages.

For more information, contact:
Analyst
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
Email: hammad.rashid@pacra.com
Web: www.pacra.com

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