Lahore, September 27, 2021 (PPI-OT):Ellcot Spinning Mills Limited, incorporated in 1988 as public limited company, is a part of one of the oldest medium-sized textile group in Pakistan – Nagina Group. The group has presence in local spinning and weaving sector through Nagina Cotton Mills Limited and Prosperity Weaving Mills Limited. The Company is engaged in production of cotton and blended yarn and operates with a spinning unit comprising 61,968 spindles. The ratings reflect Ellcot Spinning’s improving business profile; as evident by increased profitability.
During 9MFY21, the Company’s revenues increased by ~10% YoY, to stand at PKR 4.9bln on account of enhanced capacity utilization and concerted management efforts towards increased profitability. The Company largely caters to the needs of local market and it has developed a reputable clientele over the years. During the period, margins have improved along with increased net income of PKR 451mln. Improved profitability and reduced finance cost have strengthened the cashflows and the coverages. Moreover, the Company’s reliance on short-term borrowings have decreased on account of better cashflows. However, the Company’s capital structure possess modest leveraging.
Prices have also improved on both local and international fronts recently along with increased demand. The Company is expected to benefit from these improved industry dynamics in the medium run. The assigned ratings derive comfort from Ellcot Spinning’s association with Nagina Group. Textile exports of the country recorded a double-digit increase of ~23% for FY21 to stand at USD 15.4bln as compared to USD 12.5bln in FY20 due to an increase in demand for textile products internationally, led by good recovery around the globe post-pandemic. Going forward, the textile sector’s outlook is expected to stay stable in the medium term where the demand for textile products is expected to increase. The probability of little attrition in demand remains on the horizon attributable to the outbreak of COVID-19 variants.
The ratings are dependent on the Company’s ability to increase business margins through operational efficiencies and product quality. Meanwhile, any significant deterioration of cashflows culminating in notable impact on the coverages may affect the ratings. Prudent management of investment portfolio is also critical.
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