Karachi, April 26, 2022 (PPI-OT):VIS Credit Rating Company Limited (VIS) has maintained the entity ratings of J.K Spinning Mills Limited (JKSM) at ‘A-/A-1’ (Single A Minus/A-One). Outlook on the assigned ratings has been revised from ‘Stable’ to ‘Positive’. Previous rating action was announced on April 28, 2021.
Assigned ratings continue to factor in the extensive sponsor experience and established operating history of 35 years in the composite textile sector. The positive revision in rating outlook captures the increase in production capacity, robust growth trend in revenues and continued improvement in margins. Overall liquidity profile remains strong with sizeable cash flow generation while leverage indicators have trended downwards over the years. Establishment of a new mid-sized spinning unit having 52,896 spindles is already underway and is expected to commence production by Oct-2023. Moreover, the company also plans to setup a new weaving unit having 144 air jet looms, post completion of the spinning project; land has already been acquired for the same. Both projects are planned to be funded through a mix of 60% debt and 40% equity, and are expected to contribute considerably towards the future growth trajectory.
At present, JKSM’s production facilities include three spinning units and one unit each in weaving, stitching and processing segment. Since last review, the spinning segment capacity (no. of spindle: 151,944) has increased by ~10% on the back of efficiency enhancement initiatives which mainly included replacement of old spindles while the addition of 10 looms led to ~24% increase in production capacity of the weaving division (no. of looms: 110). Utilization levels in both these major segments have witnessed an upward trend on account of sizeable jump in demand particularly on the export front. Moreover, 60+ new machines were also installed in the stitching segment.
Overall sales comprise a mix of local and export sales, with yarn majorly sold in local markets while processed fabric and made-ups are largely exported. Major exports sales are directed towards USA, UK and Belgium. Yarn sales have dominated the revenue mix over the years, representing around three-fifth of total sales. Client-wise sale concentration risk is low with top 10 clients constituting around ~20% of total sales revenue. The positive rating outlook is assigned with the caveat that capitalization indicators and debt service capacity would remain intact over the expansion period.
For more information, contact:
Director Compliance and Rating Analytics,
VIS Credit Rating Company Limited
VIS House, 128/C, 25th Lane off Khayaban-e-Ittehad,
Phase VII, DHA, Karachi, Pakistan
Tel: +92-21-35311861-72
Fax: +92-21-35311873
Email: bilal@jcrvis.com.pk
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