Karachi, December 30, 2022 (PPI-OT):VIS Credit Rating Company Limited (VIS) has maintained the entity rating of Naveena Industries Limited at ‘A-/A-2’ (Single A Minus/A-Two). Outlook on the assigned ratings has been revised from ‘Stable’ to ‘Negative’. Long-Term Rating of ‘A-’ reflects good credit quality; protection factors are adequate. Risk factors may vary with possible changes in the economy. Short-Term Rating of ‘A-2’ indicates good certainty of timely payment. Liquidity factors and company fundamentals are sound. Access to capital markets is good. Risk factors are small. The previous rating action was announced on December 31, 2021.
The principal business of Naveena Industries Limited (NIL) includes manufacturing and export of grey cloth. Production facilities of the Company are located in Karachi and Rahim Yar Khan. Exports constitute around four fifth of the total sales of the Company. Revision in rating outlook is reflective of elevated gearing and leverage indicators and decline in debt service coverage. Growth in revenues in FY22 was led by increase in the average selling price and currency devaluation, albeit volumes sales registered decline. Exports of the Company encompass a major share from Europe and USA.
Client wise concentration has remained on the higher side, albeit showing improvement in FY22. Gross margins of the Company have improved on account of currency gains, however, net margins were adversely impacted due to higher financial cost largely contributed by exchange loss on Foreign Currency based borrowings. Net margins further deteriorated in 1QFY’23. In tandem with lower profitability, Funds from Operations (FFO) declined, thereby impacting FFO to debt coverages.
Overall, liquidity of the Company remained adequate, however, amidst slowdown in export markets coupled with elevated gearing levels and higher interest rates, profitability metrics are expected to remain under pressure. Raw material costs may also impact margins of the Company. Improvement in capitalization indicators and profit margins of the Company together with sustained growth in business volumes will remain important for ratings, going forward.
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
Website: https://www.vis.com.pk/