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Lahore, June 28, 2019 (PPI-OT):The ratings reflect the moderate business profile of Kohat Textile Mills Limited (Kohat Textile). In 9MFY19, growth in the Company’s revenues remained in line with the industry. The Company caters to the needs of local industry and deals in specialized products i.e. polyester yarn, acrylic yarn and viscose yarn. Kohat Textile is a net importer that exposes the Company to exchange rate volatility and eventually diluting its profit margins. However, the impact was limited as the Company has adequately invested in technological up gradations and expansion projects, to remain cost competitive which is reflected in continuously improving margins.
Nevertheless, the Company’s financial profile has remained under pressure due to significant hike in interest rates, reflected by modest coverages. The Company has significantly leveraged capital structure and it is skewed towards short-term borrowings. Going forward, improvement in cash flows is critical for meeting financial needs. The assigned ratings derive comfort from experienced management team, strong financial muscle of the Sponsors and their timely support to the Entity in the form of guarantee and subordinated loans.
The ratings are dependent on managing financial obligations while sustaining business margins, along with prudent management of working capital. Any deterioration in debt coverages leading to higher financial risk or subdued profitability will have a negative impact on the ratings. Saif Group’s support to the Entity will remain critical.
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