Karachi, June 18, 2021 (PPI-OT):VIS Credit Rating Company Limited (VIS) has maintained the entity ratings of Premium Textile Mills Limited (PRET) at ‘A-/A-2’ (A Minus/A-Two). Outlook on the assigned ratings has been revised from ‘Rating Watch-Negative’ to ‘Stable’. The long term rating of ‘A-’ signifies good credit quality; protection factors are adequate. Risk factors may vary with possible changes in the economy. The short term rating of ‘A-2’ signifies 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 April 27, 2020.
Revision in rating outlook reflects improvement in profitability and liquidity profile of the company in the ongoing year post major completion of BMR in the spinning segment along with exhibit of satisfactory debt servicing ability. However, ratings are constrained by elevated leverage indicators. Consequently, ratings remain dependent on reducing leverage indicators and efficient working capital management while maintaining margins and satisfactory debt servicing ability.
Assessment of financial risk profile incorporates subdued financial performance during FY20 on account of challenging macro-economic environment amidst COVID-19. However, profitability and liquidity profile improved during 9MFY21 in line with revival in macroeconomic performance and installation of additional spindles. Overall profitability profile of the company was impacted by higher raw material prices led by disrupted production cycle due to COVID-19, inventory losses, higher exchange loss on import loan, and elevated financial charges during FY20.
However, during 9MFY21, gross and net margins of the company reflected improvement on account of inventory gains and operational efficiencies. Going forward, over the medium term, sales are expected to escalate on account of adequate orders in pipeline along with expansion in the spinning segment. Moreover, profitability profile is expected to remain healthy in view of expansion plan rendering higher revenues and projected decline in cost of production due to installation of new gas based generators, going forward.
Liquidity profile is expected to remain in line with projected increase in overall profitability, going forward. Leverage indicators have increased on a timeline basis and are on the higher side due to sizeable capital expenditure undertaken and elevated working capital borrowings. Lower projected capex from FY21 and improved working capital management is expected to result in gradual reduction in leverage indicators over the rating horizon. Ratings are underpinned with projected improvement in leverage indictors 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/
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