Lahore, August 09, 2021 (PPI-OT):The ratings highlight the Company’s good business profile reflected by growing revenues and profitability in recent years. The ratings incorporate strong business acumen of sponsors, making Mekotex group a vertically integrated textile unit. The Company is a composite unit of textile with diversified products mainly denim and greige fabric. The Company has adequately invested in BMR and expansion projects to remain competitive through technological upgrades. This has helped in capturing growing demand in the local market, while export markets are pitched through group businesses – Kam International and Kam Apparel. Recovery from the impact of COVID-19 pandemic resulted in subdued profits at the end of FY20.
However, after the initial drawback of the pandemic, the Company bounced back by posting enhanced profitability during 9MFY21 as compared to FY20. Lower finance cost has also supplemented the profitability. Improved margins, in line with the positive industry dynamics, have assisted strengthening of business profile. The Company’s financial risk profile is characterized by high leveraging and good coverages.
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 country’s textile group exports have witnessed 9.06% growth during the first nine months (July-March) 2020-21 and remained at $11.35bln compared to $10.4bln during the same period last year.
The removal of ‘Rating Watch’ signifies the Company overcoming challenges faced by the COVID-19 outbreak. The entire textile chain had been impacted due to the initial lockdowns across the globe. However, with support from the Government and SBP’s several initiatives to provide aid, recent figures represent record numbers for the textile sector.
The ratings are dependent on the Company’s ability to maintain strong business profile and optimal capacity utilization amidst current circumstances. Meanwhile, careful management of financial obligations during and after the pandemic is imperative. Improvement in reporting mechanism and governance framework would be critical for the 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