FLASHNEWS:

PACRA Assigns Entity Ratings to H.A.R Fibres (Private) Limited

Lahore, March 29, 2023 (PPI-OT): H.A.R Fibres (Pvt) Limited reflects the adequate positioning of the company in the textile spinning industry. The company deals in the manufacturing of carded yarn of three blends: Cotton, Polyester cotton and Viscose (Coarse (1s –20s). The Company imports 70% of its cotton from the United States, Brazil, and Africa, with the remaining 30% coming from Punjab and Sindh. The efficiency parameters reflect room for improvement. The ratings incorporate the Company’s moderate yet improving business profile where revenue emanates from a single segment. Further improvement in the control environment remains vital.

Management meetings are held regularly with follow-up points to resolve or proactively address operational issues, eventually ensuring a smooth flow of operations. The liquidity profile is underpinned by adequate cash flow coverages in relation to outstanding obligations. The ratings also incorporate a low-leveraged capital structure. The Company’s capital needs emanate from financing inventories and trade receivables for which the Company relies on short-term borrowings (STBs). Going Forward, the Company is planning to start a BMR, which will add 1,000 rotors to the existing capacity which will enhance the total capacity to 30,232 spindles. The total cost of CAPEX is estimated to be PKR 100mln, which will entirely be funded from equity. BMR is expected to bring in efficiency gains, lowering cost per spindle, and will consequently improve margins.

During 7MFY23, the textile exports were valued at $10.08bln compared to $10.93bln, reflecting an 8% decline YoY – the declining trend has been recorded in the last few months. The decline in exports is driven by attrition in the demand pattern of export avenues. The hike in cotton prices and low demand for yarn in international markets is also a challenge.

The analysis of 5MFY23 reveals that among value-added items, bedwear has witnessed the largest decline of 19% (on an MoM basis), down to $217 million. Knitwear remained on the downward path in October 2022 and declined by 10% to $392 million. Among non-value-added items, cotton yarn has shown the largest decline of 35%. Moreover, a slowdown is prevailing in textile demand amid burgeoning inflationary pressures in the exporting destinations, especially in the US and European countries. The demand pattern is expected to improve post-Jun-23.

The ratings are dependent upon the management’s ability to improve margins, profitability, and financial profile of the Company. This includes keeping the debt levels manageable and improving the business profile of the company in upcoming quarters. Sponsor’s support and business acumen remain important for the ratings.

For more information, contact:
Analyst,
The Pakistan Credit Rating Agency Limited (PACRA)
Awami Complex, FB1, Usman Block New Garden Town,
Lahore, Pakistan
Tel: +92-42-5869504-6
Fax: +92-42-5830425
Email: hammad.rashid@pacra.com
Website: www.pacra.com