VIS Assigns Initial Entity Ratings to Akram Cotton Mills Limited

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VIS Assigns Initial Entity Ratings to Akram Cotton Mills Limited

July 3, 2019

Karachi, July 03, 2019 (PPI-OT): VIS Credit Rating Company Limited (VIS) has assigned initial entity ratings of ‘BBB-’/A-2’ (Triple B Minus/A-Two) to Akram Cotton Mills Limited (ACML). The medium to long-term rating of ‘BBB-’ denotes adequate credit quality coupled with reasonable and sufficient protection factors. Moreover, risk factors may vary with possible changes 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 ratings is ‘Stable’.

ACML is a spinning mill specialized in the production of carded cotton yarns for hosiery purposes. The company generates almost 100% sales through local customers. Shareholding is mainly vested with the sponsoring family which is actively involved in the day to day affairs of the company. The company generated sales growth during last three years through volumetric increase and favourable prices which impacted profits positively. With installation of new frames and compact devices on ring frames in beginning FY18, the company was able to optimize production and improve yarn quality.

Resultantly, gross margins improved on a timeline basis. Trade receivables of the company continue to remain modest as yarn is mostly sold on a cash basis. Leverage indicators increased by end-HY19 mainly on account of seasonal procurement of cotton; as per management, the said indicators, given utilization of raw material, will be normalized by end-FY19. The company has a moderate financial risk profile emanating from adequate coverages and manageable leverage indicators. The ratings are dependent upon maintenance of profit margin, coverage and gearing ratios.

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

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