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Karachi: VIS Credit Rating Company Limited has reaffirmed the entity ratings for Umar Spinning Mills Private Limited at ‘BBB+/A2’, indicating adequate credit quality and good likelihood of timely repayment of short-term obligations. The outlook remains stable despite ongoing challenges in Pakistan’s textile spinning sector.
Incorporated in 1991, Umar Spinning Mills operates primarily in the manufacturing and sale of yarn, with its registered office in Karachi and a manufacturing plant in Lahore. The company, part of The Pervaiz Group of Companies, is also expanding its operations with a new salt processing plant in the testing phase.
The ratings consider the high to medium business risk profile of the textile spinning sector, which is subject to demand cyclicality, competitive pressures, and regulatory challenges. The sector’s performance is closely tied to broader economic conditions, with recent issues such as pest infestations and shifts in crop production affecting domestic cotton supply. Political uncertainty and global procurement shifts have also impacted export demand.
Recent regulatory changes, including the withdrawal of the Export Facilitation Scheme and adjustments in energy tariffs, have increased cost pressures. The industry faces competition from regional economies with lower energy costs and diverse product offerings. Rising power tariffs and wage adjustments continue to affect profitability.
Financially, the company has seen revenue growth, but cost pressures have led to margin contraction. Increased production costs, particularly in energy and raw materials, alongside competitive pressures, have affected profitability. The company’s leverage has increased due to reliance on short-term debt, although liquidity remains stable through improved working capital management.
The ratings will continue to depend on Umar Spinning Mills’ ability to improve profitability and maintain financial support from sponsors. The company’s future performance will be closely monitored in relation to these factors.