Karachi, In the face of escalating costs and a challenging economic environment, Kohat Textile Mills Limited has retained its ratings, reflecting its resilience and strategic responses to sector-wide pressures.
According to The Pakistan Credit Rating Agency Limited, the spinning sector in Pakistan, valued at approximately PKR 775 billion, is experiencing significant strain due to rising commodity prices and increased costs for cotton and fiber. This situation has severely impacted the working capital needs and profitability margins across the industry. Additionally, recent hikes in energy tariffs have compounded these challenges, stretching cash flows and liquidity and prompting PACRA to place the industry's outlook on watch.
Kohat Textile Mills, part of the Saif Group, has been active in the spinning sector since its inception and currently operates with 44,508 spindles. Despite the sector's difficulties, the company posted a revenue increase of about 21% in FY23, driven by higher yarn prices. Nevertheless, profitability has declined due to rising raw material and manufacturing costs, including energy and labor expenses. The company has invested substantially in transitioning to solar energy, which is expected to mitigate operational costs moving forward.
The management of Kohat Textile is planning further enhancements to their solar capacity, which should provide additional financial relief. The company's financial structure is described as adequately leveraged, though it faces an extended working capital cycle and sufficient coverage ratios. PACRA's ratings reflect Kohat Textile’s ability to sustain operations under challenging conditions, with continued support from the Saif Group deemed crucial for maintaining its current ratings.