Lahore, September 27, 2021 (PPI-OT):Nagina Cotton Mills Limited, incorporated in 1967 as public limited company, is the flagship company of the one of the oldest medium-sized textile group in Pakistan – Nagina Group. The group has presence in local spinning and weaving sector through Ellcot Spinning Mills Limited and Prosperity Weaving Mills Limited. Nagina Cotton is engaged in production of export-quality yarn. The ratings reflect Nagina Cotton’s good business profile. During 9MFY21, the Company’s revenues dipped by ~14% YoY, to stand at PKR 5.1bln mainly due to significant reduction in exports; although local sales have increased during the period. This trend is in line with the industry due to enhanced margins in the local market.
During the period, margins have improved along with increased net income of PKR 487mln. Improved profitability and reduced finance cost have strengthened the cashflows and the coverages. Moreover, the Company’s reliance on short-term borrowings have decreased significantly primarily due to enhanced cashflows. However, the Company has modest leveraged capital structure. The assigned ratings derive comfort from Nagina Cotton’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 generate sufficient cash flows to fulfill its financial obligations, while sustaining profitability. At the same time, 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