Lahore, The Pakistan Credit Rating Agency Limited (PACRA) has maintained the entity ratings of Sapphire Fibres Limited, reflecting the company's strong business profile and its ability to manage volatility in the textile industry. Sapphire Fibres Limited, recognized for its broad value chain presence, has shown growth and resilience, especially in its spinning segment.
According to Pakistan Credit Rating Agency Limited, Sapphire Fibres Limited's business profile benefits from its diversified product range across three segments: Spinning, Knitting, and Denim. The company's spinning capacity was notably enhanced to 104,496 spindles in FY23, contributing significantly to its growth. Despite a consistent volumetric pattern, the company has benefited from the devaluation of the Rupee in FY23. Sapphire Fibres Limited boasts a large revenue base and captures attractive margins from its value-addition segment. The company's export portfolio is mainly comprised of Yarn, Fabric, and Garments, achieving geographical diversification through an established customer base and product differentiation. Locally, the company serves several big players in the textile industry. The company's financial performance in FY23 and 1QFY24 has been strong, with a topline of PKR 12.2 billion in 1QFY24 and net profitability of PKR 716 million during the same period.
Sapphire Fibres Limited's financial risk profile is robust, characterized by low leverage and an improved capital structure. The management's strategic investment decisions and rigorous adherence to them have strengthened the company's financial position. Additionally, the company's association with the well-established Sapphire Group, which has a distinguished presence in various sectors, adds to its creditworthiness.
However, the textile industry faced challenges in FY23, including high energy costs, cotton shortages, and foreign exchange rate uncertainties, leading to a 15% year-on-year decline in textile exports. The value-added and basic textile products also witnessed significant declines.
PACRA's ratings for Sapphire Fibres Limited hinge on the company's ability to sustain its business profile, maintain profitability and margins from core textile operations, and manage its non-core income and surplus funds effectively. The sustainability of coverages will be crucial in maintaining the company's stable financial profile.