VIS Reaffirms Ratings for Pakistan Cables Limited, Outlook Negative

Karachi: Pakistan Cables Limited (PCAL) has had its entity ratings reaffirmed at ‘A/A1’ (Single A/A One) by VIS Credit Rating Company Ltd. (VIS), maintaining the medium to long-term rating at ‘A’ and the short-term rating at ‘A1’. The outlook remains ‘Negative’, following the previous ratings action announced on August 01, 2023.

According to VIS Credit Rating Company Limited, these ratings underscore the company’s strong sponsor profile and well-established brand within Pakistan’s wire and cable industry. However, the business faces elevated risks due to rising input costs, a challenging economic environment, and increasing competition from unorganized market players.

In fiscal year 2024, Pakistan Cables Limited experienced higher turnover driven by both price and volumetric growth. Despite this, the company faced constrained gross margins due to increased raw material and energy costs, which, together with higher operating expenses and financial charges, resulted in a decline in net profitability and a net loss for the first quarter of fiscal year 2025. The company has invested significantly in a new production facility, which has begun partial operations, but this expansion has also increased financial risk through higher gearing and leverage ratios. Nevertheless, liquidity remains stable, supported by a steady current ratio and an improved cash conversion cycle. Management is hopeful that increased production levels will bolster margins in the future.

The ratings will remain sensitive to improvements in profitability margins, debt coverage, and efforts to reduce balance sheet leverage.

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