KARACHI: The Pakistan Credit Rating Agency Limited (PACRA) has reaffirmed the entity ratings of Kohat Textile Mills Limited, highlighting its resilient performance despite prevailing challenges in Pakistan's spinning industry.

The industry, valued at approximately PKR 775 billion, is highly fragmented with around 368 dedicated spinning units and a combined capacity of roughly 13.4 million spindles as of the fiscal year 2024. The sector faces a shortfall with revised cotton production estimates at about 10.9 million bales, while actual production reached only 5.5 million bales. To address the gap, the country's imported cotton requirement has increased from 3.5 million to 4 million bales this year.

Kohat Textile, a part of the Saif Group's diverse portfolio, holds strategic importance as the Group's first venture into the spinning industry. The company specializes in yarn production with a spinning capacity of 44,508 spindles. During FY24, Kohat Textile recorded a significant revenue increase of approximately 33.8%, driven by improved demand and favorable pricing, which bolstered its financial performance.

The company has also engaged in capital expenditure initiatives, including investments in solar energy solutions with a capacity of 3.6MW, to enhance energy efficiency and reduce operational expenses. Despite the broader industry's cash flow challenges due to rising energy tariffs, Kohat Textile has maintained its operational stability, supported by effective cost management and strategic risk mitigation.

PACRA's ratings are contingent on Kohat Textile's continued operational capability and support from the Saif Group. The ratings may be affected by a significant downturn in revenue or financial coverage, underscoring the importance of the Group's backing in maintaining the company's competitive position within the industry.