Sheikhupura, The Pakistan Credit Rating Agency Limited (PACRA) has assigned initial ratings to Newage Cables (Private) Limited, marking a significant acknowledgment of the company's standing in Pakistan's cable manufacturing industry. Newage Cables has been rated 'A-' for the long term and 'A2' for the short term, with a stable outlook, reflecting the company's strong position, technological advancement, and diversified product range amidst challenging economic conditions.
According to The Pakistan Credit Rating Agency Limited, Newage Cables, one of the largest and oldest cable manufacturers in Pakistan, has recently expanded its production capabilities by installing a new plant equipped with the most advanced machinery, including a 66KV CDCC CCV Maillefer Line. This enhancement, along with its state-of-the-art cable testing facility capable of testing up to 120KV, underscores the company's commitment to quality and innovation. The ratings reflect the strengths derived from the experienced sponsors and the company's significant role in an industry that is largely dependent on imported raw materials, which have been affected by the deteriorating macroeconomic conditions, including limited foreign exchange availability and currency devaluation.
The company's financial performance and market position in the oligopolistic cable industry, where it is one of the three dominant firms holding a combined market share of 60%, were key factors in the assigned ratings. Newage's diverse product range, which includes transmission and distribution conductors, power cables, and solar and housing wiring, plays a crucial role in its revenue, with conductors and cable and wiring contributing significantly. The company's sales are diversified across various sectors, with a substantial focus on government projects and minimal exports.
For FY23, Newage Cables reported a topline increase to PKR 27 billion, up from PKR 23 billion in FY22, capturing approximately 22% of the market share. This growth was attributed to price increases, despite the company facing weak margins over the years. The FY23 gross margins improved to 11.6% from 9.6% in FY22, while net margins remained at 3%. The company's financial profile is supported by adequate working capital management, a considerable borrowing cushion, strong debt cover, and a capital structure bolstered by revaluation surplus.
The ratings are contingent on the company's ability to sustain volumes amidst the current economic challenges and maintain a stable financial risk profile. The need for improvements in formal governance and organizational structure is noted, given Newage's status as a family-owned and operated company with an experienced management team.