PACRA Maintains Entity Ratings of Al Rahim Textile Industries Limited

Lahore, January 27, 2020 (PPI-OT): Al Rahim Textile Industries Limited (Al Rahim) is a family owned textile company that enjoys a strong position in towel manufacturing. Al Rahim’s primary business remains export oriented towel production. It also provides fabric and other processing facilities to its associated company – Al Rahim Retail Limited – and to other local manufacturers. Overall export volumes of the towel industry have stagnated mainly due to high cost of doing business and increasing competition in major export markets. Although the Company’s volumes remained stagnated, the top-line grew due to positive impact of rupee devaluation. Towel industry enjoys relatively better margins that are reflected in Al Rahim’s profitability.

However, margins have come under pressure recently owing to increasing input costs, aggravated by inflationary pressure in the economy. Further, the rise in benchmark rates increased finance cost considerably, putting pressure on the Company’s bottom-line. The Company’s financial risk profile is considered strong characterized by low leveraging and strong coverages. The Company’s working capital management needs improvement.

The working capital cycle is significantly higher than industry average, creating pressure on liquidity profile. Going forward, governance framework of the Company is expected to further strengthen. The assigned ratings incorporate recent corporatization of the group, experienced management team, strong financial muscle of sponsors and their willingness to support the entity as demonstrated historically.

The ratings are dependent on sustaining business margins while maintaining strong financial risk profile. Prudent management of working capital requirements, in-line with industry average, will remain critical. Strengthening of corporate structure, governance framework and timely completion of related activity are critical.

For more information, contact:
Analyst,
The Pakistan Credit Rating Agency Limited (PACRA)
Awami Complex, FB1, Usman Block New Garden Town,
Lahore, Pakistan
Tel: +92-42-5869504-6
Fax: +92-42-5830425
Email: hammad.rashid@pacra.com
Website: www.pacra.com