Lahore, In the face of evolving market conditions, The Pakistan Credit Rating Agency (PACRA) has decided to maintain its entity ratings for Zahidjee Textile Mills Limited. The company, recognized for its strong market presence, has over time expanded its manufacturing and sales capacities in yarn, value-added fabrics, and textile made-ups, thereby bolstering its revenue base.
According to Pakistan Credit Rating Agency (PACRA), Zahidjee Textile Mills Limited has evidenced significant growth over the years, particularly with the establishment of a weaving unit and an increase in production capacity. For the fiscal year 2023, the company reported a notable rise in its top line, reaching PKR 32.3 billion from PKR 27.9 billion the previous year. A notable shift in strategy led to local sales making up 88.2% of the revenue base, totaling PKR 28.5 billion, up from PKR 23.7 billion in FY22. The company's local sales are dominated by Yarn, followed by Waste and leftover, Cloth, and Conversion receipts. On the international front, export sales remained relatively constant at PKR 4 billion, down from PKR 4.4 billion the previous year, with destinations spanning Africa, South America, Europe, and North America.
The company's financial statements also showed a conservative approach to borrowing, evidenced by a decrease in total leveraging to 30.4% from 36.9% at the end of June 2022. Despite this, the net profitability stood at PKR 1.2 billion, down from PKR 3.9 billion in FY22. The company's future plans involve a strategic expansion with the addition of 50,400 spindles in two phases, the first of which will see the implementation of 20,160 spindles.
However, the textile industry faced its own set of challenges. In FY23, textile exports declined by 15% year-on-year, amounting to $16.5 billion from $19.33 billion. This decline commenced at the start of FY23 and persisted, with value-added products such as knitwear, bedwear, towels, and ready-made garments dropping by 13% YoY, and basic textiles like raw cotton, cotton yarn, and cotton cloth witnessing a 21% YoY decrease.
Given the current industry dynamics, PACRA's ratings are contingent upon Zahidjee Textile Mills' ability to uphold its robust business profile. Key to these ratings are the maintenance of improved profit margins and sound coverages. Any setbacks in the financial risk profile could potentially influence the ratings adversely.