Karachi: VIS Credit Rating Company Limited (VIS) has reaffirmed the entity ratings for Kamal Textile Mills (Private) Limited (KTML) at 'A-/A-2' for medium to long-term and short-term financial commitments, respectively. This rating reflects a stable financial outlook and good credit quality, indicating the company's ability to meet its financial obligations on time.

According to VIS Credit Rating Company Limited, the stable rating reflects KTML’s solid market position within the textile industry, despite facing sector-wide challenges such as economic cyclicality and competitive pressures. The textile sector, a significant contributor to Pakistan’s exports, is susceptible to shifts in global economic conditions and geopolitical tensions, which can impact demand and operational costs.

KTML, a part of the Kamal Group and a family-owned enterprise with over 13 years in the textile industry, specializes in the export of home textiles, garments, and processed fabrics. The ratings consider the company’s adept handling of the challenging economic environment, including managing supply-side risks related to local cotton production and reliance on imported raw materials, which are affected by exchange rate fluctuations.

The review period highlighted KTML's financial resilience, with revenue in FY23 declining due to lower sales volumes, which was somewhat offset by higher selling prices. Although gross margins improved, net margins were pressured by increased finance costs. In the first nine months of FY24, KTML experienced a rebound in net sales driven by a partial recovery in demand, but faced margin pressures due to rising operating expenses and finance costs.

The financial risk profile of the company showed fluctuations in cash flow and debt coverage indicators. The Debt Service Coverage Ratio (DSCR) declined but remained at an adequate level, while the current ratio saw slight improvements. Gearing and leverage indicators also improved, attributed to an increase in equity base outpacing the growth in debt levels.

Going forward, VIS notes that profitability and capitalization metrics will be crucial for maintaining the current ratings, as the company navigates the volatile textile market and economic uncertainties.