Lahore: Ali Embroidery Mills (Private) Limited has maintained its entity ratings, according to recent assessments by the Pakistan Credit Rating Agency Limited (PACRA). The agency has affirmed the company's long-term rating at BBB and short-term rating at A2, with a stable outlook for the year ahead.

According to a statement by The Pakistan Credit Rating Agency Limited, the ratings reflect Ali Embroidery Mills' business profile within the textile sector, particularly in the specialized embroidery segment. Despite operating in a highly fragmented market, the company has maintained full capacity utilization, operating 122 multi-head embroidery machines and 33 Schiffli machines.

The company's revenue has shown consistent growth, increasing from PKR 1,242 million in FY22 to PKR 2,161 million in FY24. However, PACRA noted a concentration risk due to a significant portion of sales being to related parties. The company is addressing this by expanding its customer base to sustain growth.

In FY24, the company faced challenges from rising raw material prices, which affected gross margins. However, optimization of operating expenses helped mitigate this impact. The company plans to diversify revenue streams by venturing into online retail and enhancing production capacity.

The company's financial risk profile remains adequate, supported by a highly leveraged capital structure, primarily through sponsor loans. Improvements in cashflows and coverages have been noted, along with a slight improvement in the overall cost structure.

The textile sector as a whole has experienced slight growth, with exports reaching USD 16.7 billion in FY24. However, the transition to a normal tax regime is expected to impact profitability for export-oriented units.

PACRA emphasized that the company's ratings depend on its ability to improve business volumes while maintaining profitability. Enhancements in governance and sufficient cashflow generation from core operations are also deemed crucial for future stability.