Lahore, July 21, 2022 (PPI-OT):Bari Mills is a family-owned private company operated by a seasoned business family in Karachi. The Company is primarily an export-oriented, towel manufacturing concern. Overall exports of the towel industry increased during FY22. During 10MFY22 towel exports stood at USD ~927mln as compared to USD ~776mln same period last year depicted a growth of ~20% value-wise, where volume posted modest growth of ~5% during this period. Growth in the towel export sector was witnessed as Pakistan was able to attract export orders when regional players were struggling due to the extended lockdowns and periodic pandemic waves.

The towel sector’s contribution to overall textile exports was unchanged and stood at ~6%. The towel industry enjoys relatively better margins that are reflected in MY Bari’s profitability on the back of local cotton, which is more suitable for manufacturing towels. During 9MFY22 revenue of the Company showed ~ 17% growth and margins were largely sustained.

The Company’s ~66% exports diverted to the USA while remaining towards Europe. The revenues are expected to follow an upward trajectory as depicted in financial projections hence capturing a positive outlook. On a standalone basis, the Company’s concentration levels – both customer and geographical – are high with the majority of company revenues (~43%) emanating from a single customer.

The Financial risk profile of the Company is characterized by comfortable cashflows, coverages, and working capital cycle. Capital structure is leveraged with a mix of long-term and short-term borrowings. After the ease of the pandemic, manufacturing capacities from regional competitors are coming online, which can create challenges for the future sustainability of higher demand, on the flip side higher policy rate of 15% will assert further pressure on the cost of doing business. However, the Company has availed concessionary borrowing from SBP (LTFF and ERF) which adds comfort to the assigned ratings. In absence of any further debt-driven expansion in the medium-term, the financial profile is expected to further improve.

The ratings are dependent on maintaining optimal operations with sustained growth in revenue and margins, reducing customer concentration while maintaining financial risk at a low level is critical. Meanwhile, strengthening the governance framework and control environment for better oversight of strategic affairs is essential 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