Karachi, August 10, 2022 (PPI-OT):VIS Credit Rating Company Limited (VIS) has reaffirmed the entity ratings of Kohinoor Mills Limited (KML) at ‘BBB+/A-2’ (Triple B-Plus/A-Two). Outlook on the assigned rating is ‘Stable’. The medium to long-term rating of ‘BBB+’ denotes adequate credit quality with reasonable and sufficient protection factors. Moreover, risk factors are considered variable with possible changes in economy. The short-term rating of ‘A-2’ denotes good certainty of timely payments coupled with sound liquidity and fundamental protection factors. The previous rating action was announced on April 19, 2021.
KML is principally engaged in the weaving, bleaching, dyeing, and finishing of grey, white, and dyed fabrics, driven by in-house Independent Power Producer (IPP). The Company is a key supplier for globally renowned brands in the industry, with more than half of the clientele concentrated in Asia. Other exports markets include Europe, Canada, and the U.S.A. KML. The Company is also in the process of establishing its own garment stitching unit for which construction and civil works are underway.
Assigned ratings take note of improvement in topline on the back of strong demand in international and domestic market during FY21 and FY22. Despite COVID induced slowdown in market leading to many challenges in the industry, overall demand for textile products in Pakistan remained favourable during the year. While the Company’s export sales continued to dominate, the local sales also registered strong growth during FY21. Segment wise, dyeing remained the dominant contributor to revenues accounting for more than 2/3rd of total sales, with remaining contributed by weaving.
Increase in topline was also supported by installation of additional capacities in the weaving segment and routine BMR activities. Revenues are further expected to improve post completion of Company’s new garment segment which is expected to become operational by HFY23. Rating also takes into account improvement in gross margins during the year, driven by rupee devaluation and efficiency gains in production and energy cost. Going forward, while margins are projected to further improve on account of Company’s garment segment becoming operational, the Company remains exposed to risk of possible global slowdown. Achievement of projected revenue and margins will remain key for ratings.
Assessment of financial profile of the Company depicts improvement in debt servicing profile led by higher profitability recorded during the year. However, Company’s liquidity profile remains under pressure, albeit reflecting an improving trend in 9MFY22. Capitalization indicators also exhibit an improving trend on timeline basis. Gearing and leverage may increase due to planned CAPEX for financing new garments unit, nevertheless, management expects it to remain manageable on account of profit retention. Improvement in liquidity profile and capitalization indicators of the Company, along with sustainability of profitability profile 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
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