Lahore, June 25, 2021 (PPI-OT):Siddiqsons Limited (Siddiqsons or ‘the Company’) is the flagship company of the Siddiqsons group and is considered a pioneer of the denim industry in Pakistan. Siddiqsons mainly derives its revenue from the manufacturing and sale of denim in addition to having a portfolio of strategic investments. The Company achieved a moderate growth in revenue of ~2% on the back of rupee depreciation, while the volumes remained in line with the corresponding period of last year. Despite the challenges faced by the Company at the end of FY20 due to COVID-19, it was able to enhance profitability during 9MFY21. Accordingly, rating watch has been removed. Sales mix remained dominated by healthy exports.
Similarly, margins recorded favourable increase. Denim industry enjoys relatively better margins that are reflected in the Company’s profitability. Meanwhile, the diverse investment portfolio generates steady investment income, mainly in the form of dividends and rental income, supporting the Company’s bottom line. The Company is diversifying its product slate to enhance outreach to export avenues. During 3QFY21, Siddiqsons paid off more than half of its short term debt, effectively, reducing leverage. Although the Company’s working capital cycle was stretched, its working capital management remains adequate with cushion at trade level available with good coverages. The ratings incorporate financial strength and proven track record of the sponsoring family.
The ratings are dependent on the Company’s ability to sustain its operations in prevailing conditions. The management is cognizant of these challenges and is working on this front. Meanwhile prudent working capital management and generating sustainable cashflows from core operations are important. Significant deterioration in business profile due to prolonged downturn leading to deterioration in coverages and/or margins will impact 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