PACRA Upgrades Entity Ratings of Ibrahim Fibres Limited

Lahore, February 10, 2020 (PPI-OT): The ratings reflect Ibrahim Fibres’ long time leading position in the local polyester staple fibre (PSF) industry. Imposition of anti-dumping duty on PSF imported from China since Feb-16 has supported volumetric growth and margins and is expected to continue in the future. Volatility in crude oil prices impacted the entire petrochemical chain during FY19, resulting in fluctuating PSF prices and inventory losses, resulting in a decline in the Company’s core margins and profitability on a YoY basis.

However, given strong domestic demand and efficient production, performance is expected to recover with a recovery in oil prices while currency devaluation is expected to support domestic PSF prices. The Company’s spinning segment continues to support its overall profitability. Keeping this in view, the Company is in the process of expanding its spinning capacity by installing a state-of-the-art 100,320 spindles plant.

This project has partially come online and is expected to become fully operational in 4QFY20. The expansion is being undertaken with a mixture of debt and internally generated cash flows. The Company’s financial profile remains very strong, accentuated by strong working capital management, low leveraging and strong coverages. The ratings further incorporate the Company’s association with the Ibrahim Group, which has demonstrated strong support.

The ratings are dependent on the Company’s ability to sustain its margins and profitability. Optimal utilization of capacity enhancement in spinning and resulting improvement in margins will remain important. Excessive borrowings and/or prolonged downturn in margins and/or coverages may impact the ratings.

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