Lahore, April 01, 2019 (PPI-OT): The ratings reflect Nagina Cotton Mills Limited’s improving business profile in harmonization with textile industry. The Company’s revenues are on growing trajectory over the years, a factor of continuous BMR translating into operational efficiencies, eventually higher production volumes. Textile industry in general and spinning industry in particular suffer from low international commodity prices. Moreover, lower demand for cotton yarn from China owing to trade war with USA has suppressed the demand of yarn in local market. Despite this the Company has improved its business profile on account of reputable clientele and efficiency gains.
Additionally, withdrawal of custom duty and sales tax on cotton imports, coupled with subsidized gas rates for textile industry will benefit the industry. Leveraging of the Company has increased owing to debt-driven BMR; though remained modest. Working capital cycle is stretched on the back of higher inventory procurement. Meanwhile, Nagina Cotton intends to gradually build a sizable investment portfolio.
This exposes the Company to market risk as exhibited by recent volatility in stock exchange. Meanwhile, the Company was able to limit its losses because of its conservative approach in stock allocation. Any significant decline in investments leading to losses, and eventually equity erosion, will impact the financial profile of the Company. The management’s ability to manage this risk is critical. The assigned ratings derive comfort from Nagina Cotton’s association with Nagina Group.
The ratings are dependent on the Company’s ability to sustain its business profile. Sufficient cash generation to fulfill the increasing financial obligations will remain critical for the ratings. At the same time, prudent management of investment portfolio is important.
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