Karachi, July 18, 2022 (PPI-OT): VIS Credit Rating Company Limited (VIS) has reaffirmed the entity ratings of Premium Textile Mills Limited (PRET) at ‘A-/A-2’ (A Minus/A-Two). Outlook on the assigned ratings is ‘Stable’. The long term rating of ‘A-’ signifies good credit quality; protection factors are adequate. Risk factors may vary with possible changes in the economy. The short term rating of ‘A-2’ signifies good certainty of timely payment. Liquidity factors and company fundamentals are sound. Access to capital markets is good. Risk factors are small. The previous rating action was announced on June 18, 2021.
Premium Textile Mills Limited (PRET) was incorporated as a Public Limited Company in 1989. The Company is part of the Premium Group of Companies which is involved in trading (Prudential Enterprises), auto parts (Techno Fabrik) and textile (PRET and Premium Knits) sectors. PRET is engaged in the manufacturing and sale of yarn to both local and export market. The manufacturing facility of the Company is located in Nooriabad.
Assigned ratings take note of improvement in the Company’s overall earning profile during FY21 and the ongoing year on the back of strong demand and product prices. Akin to spinning industry, the Company’s topline witnessed growth primarily driven by higher yarn prices. Margins also improved on the back of favourable inventory and exchange gains in FY21 and 1HFY22. The Company also incurred capital expenditure to enhance operational efficiencies and production capacities, contributing to margin improvement. However, ratings remain constrained by vulnerability of the spinning sector to availability and volatility in prices of raw materials and exchange rate risk.
Assessment of financial risk profile depicts strengthening of liquidity indicators on the back of higher profitability. Fund Flow from Operations (FFO) registered improvement on timeline basis despite high reliance on debt-based financing for the capex, which consequently led to notable improvement in the company’s capacity to meet its debt obligations. Current ratio and short-term debt coverage also depict improvement. Deleveraging of balance sheet was witnessed in FY21, supported by higher profitability.
Resultantly, gearing and leverage indicators stand improved at the end of 1HYFY22. Going forward, Company projects strong revenue and margin growth over the rating horizon. Ratings remain sensitive to achievement of projected plans in terms of turnover and margins along with continued deleveraging of balance sheet and maintenance of debt service coverage and liquidity metrics in line with the thresholds for the assigned ratings.
For more information, contact:
Director Compliance and Rating Analytics,
VIS Credit Rating Company Limited
VIS House, 128/C, 25th Lane off Khayaban-e-Ittehad,
Phase VII, DHA, Karachi, Pakistan