Karachi: VIS Credit Rating Company Limited has reaffirmed the entity ratings of Kohinoor Textile Mills Limited at ‘A+/A-1’. The long-term rating of ‘A+’ indicates a solid credit quality with adequate protection factors, though subject to variation from economic changes. The short-term rating of ‘A-1’ signifies a strong likelihood of timely financial obligations fulfillment, supported by excellent liquidity.
According to VIS Credit Rating Company Limited, Kohinoor Textile Mills Limited, part of the Kohinoor Maple Leaf Group, operates as a comprehensive textile mill. The firm specializes in the production of yarn, greige, dyed and printed fabrics, and a wide range of home textile products. With a legacy spanning over 70 years, Kohinoor Textile Mills manages a full production cycle, including spinning, weaving, processing, and stitching, backed by a substantial workforce of approximately 5,900 employees stationed across its facilities in Rawalpindi and Kasur, with its head office in Lahore.
The ratings reflect the medium business risk profile of the textile sector in Pakistan, characterized by economic cyclicality and high competition. The sector’s performance heavily depends on economic conditions, making it vulnerable to demand shifts influenced by economic dynamics and global market conditions. The industry’s substantial contribution to total exports exposes it to global economic cycles, geopolitical challenges, and liquidity issues, particularly in the slow processing of sales tax refunds. Additionally, reliance on local cotton crops and imported materials presents significant exchange rate risks.
Recent business updates noted an increase in the company’s sales in FY23, primarily driven by effective price adjustments and a rise in sales volume. However, Kohinoor Textile Mills faced a reduction in gross margins in FY23 and 9MFY24 due to elevated costs of raw materials and increased expenses for fuel and power. Moreover, the company’s net margins were compressed by rising finance costs. Despite these challenges, the company anticipates revenue growth and margin improvements through enhanced production capacities and the implementation of cost-cutting strategies.
Further, the company’s financial risk profile has been considered, noting a rise in debt due to funding for expanding and modernizing production facilities and the installation of solar power plants as of March 2024. This has slightly impacted the capitalization profile, which is expected to remain a key factor in maintaining the current ratings.