Lahore, July 17, 2023 (PPI-OT): The ratings reflect Nimir Resins Limited’s (“NRL” or “The Company”) solid business profile. Established as a listed entity, a well-devised governance framework is in place along with a skilled and experienced management team and modern production facilities. The Company has primarily three production lines, catering to different industries of the economy. These are essential ingredients for textile, paper and packaging and paint industries. The client base reflects good names. NRL also furnishes synergistic benefits and also other efficiency due to being owned and operated by the Nimir Group. Demand drivers of these industries are closely linked with economic growth and construction/infrastructure developments. During 10MFY23 (July-April) Large Scale Manufacturing (LSM) reported a decline of 9.3% as compared to the same period last year, on the other side construction industry also registered a negative growth of ~ -5.5% in 9MFY23.
The economy is facing immense challenges due to rising inflation/interest rates and massive rupee depreciation which resulted in an unprecedented increase in the cost of doing business. On the flip side demand is also softened, due to a decline in consumer buying power, together with the significant rise in cost of construction and public spending cuts. The topline of the Company registered a positive growth of ~15% during 9MFY23, mainly due to price inflation. However, margins showed some dilution at all levels. The operations of the Company benefited from a modern manufacturing facility and robust control environment. The financial risk profile of the Company is characterized by moderate coverages, cashflows, and stretched working capital cycle which depicts the industry norm.
Capital structure is moderately leveraged where borrowings are mainly comprised of short-term to meet the working capital requirements. The policy rate has been increased up to 22%, further elevating the debt service cost in the future. Going forward, growth in business would necessitate prudent management of margins, debt mix, and sufficient internal capital formation. The ratings take comfort from the NRL’s association with Nimir Group of Companies.
The ratings are dependent on sustainable growth in the top-line and bottom-line with upheld margins, and market share while retaining sufficient cash flows and coverages. However, prudent financial management and maintaining sufficient liquidity under stressed economic conditions will remain important for 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
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