FLASHNEWS:

PACRA Retains Stable ‘A’ Ratings for Stylers International Amid Diversification and Expansion Efforts

Karachi: The Pakistan Credit Rating Agency Limited (PACRA) has maintained its 'A' long-term and 'A1' short-term ratings for Stylers International Limited, reflecting consistent performance and a stable outlook despite some shifts in product mix and pricing pressures.

According to The Pakistan Credit Rating Agency Limited, Stylers International Limited, known as SIL, is recognized for its significant position in the textile sector, especially within the competitive denim market. SIL, part of the US group's new venture vertical alongside its workwear segment, is distinguished by its advanced production capabilities and diverse product lineup, including denim jeans, shorts, jackets, shirts, trousers, and children’s wear. The denim jeans remain the company’s highest volume product. Despite a slight decrease in local sales from PKR 440.5 million in FY23 to PKR 250.6 million in FY24, SIL’s export-oriented strategy has sustained its revenue largely unchanged in volumetric terms at PKR 14.0 billion, though down from PKR 14.5 billion the previous year. The European market continues to be the main export destination for the company.

The company’s recent expansion into children's wear and denim shorts has been strategically timed to meet peak season demand during summer, bolstering its financial top line. However, escalating energy tariffs have slightly compressed profit margins, with net earnings reported at PKR 1.47 billion for FY24, down from PKR 2.52 billion in FY23. The company’s long-term sustainability is supported by stable relationships with established international brands, which form its top clientele.

Stylers International is also finalizing its "Sunshine" project, expected to be operational by the first quarter of CY25. This initiative, costing approximately PKR 10 billion, is financed through a rights issue and internally generated cash flows. It includes the installation of a 1.6 Mega Watt solar power plant, enhancing operational resilience and contributing to environmental sustainability. SIL’s financial strategy is noted for its minimal leverage and stable cash flows and coverages, contributing to a strong financial risk profile.

The ratings affirm the effectiveness of SIL's management strategies, including client consolidation to manage concentration risks and systematic production enhancements to improve the control environment. The company's recent transition to a publicly listed entity following its merger with AEL Textile Limited signifies a significant milestone. PACRA’s ratings are contingent upon SIL maintaining its operational integrity and financial stability in the current economic climate, with key factors being the improvement in margins and the maintenance of optimal coverages and cash flows during business expansion.