Karachi, March 08, 2022 (PPI-OT):VIS Credit Rating Company Limited (VIS) has reaffirmed the entity ratings of Z.A. Corporation (Pvt.) Limited (ZAC) at ‘BBB+’ (Triple B Plus). The medium to long-term rating of ‘BBB+’ denotes adequate credit quality coupled with reasonable protection factors. Moreover, risk factors are considered variable if changes occur in the economy. The short-term rating of ‘A-2’ denotes good certainty of timely repayment, sound liquidity factors and good company’s fundamentals. Outlook on the assigned rating is ‘Stable’. Previous ratings action was announced on February 26, 2021.
ZAC is a medium-sized spinning unit located in Faisalabad. Shareholding of the company is vested with Sheikh Danish Ali who is actively involved in day-to-day affairs of the company. The assigned ratings take into account growth in revenue and profits that is being driven mainly by enhanced volumes, an outcome of phase-wise capacity expansion of the company. Product portfolio comprises viscose and cotton yarn, and unregistered persons account for majority sales, however, the company manages the counterparty risk by making sales on cash/advance basis.
Supported by improved cash flows generation, coverages are considered adequate despite some decline in FFO-to-total debt owing to mobilization of new long-term loan in order to fund the expansion plan. Leverage indicators, though increased by end-HY22 due to capex and working capital requirements, have remained manageable. Going forward, the ratings are dependent on growth in sales, maintenance of margins and improvement in leverage indicators. Meanwhile, major ratings constraints include vulnerability of the spinning sector to availability and prices of raw materials, foreign exchange risk as ZAC is heavily dependent on imported viscose, and any adverse changes in the regulatory duties structure.
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/