Lahore, July 01, 2022 (PPI-OT):The ratings reflect the moderate business profile of Kohat Textile Mills Limited (Kohat Textile). The Company caters to the needs of local industry and deals in specialized products i.e. polyester yarn, acrylic yarn, and viscose yarn. During 9MFY22, Company’s revenue improved to PKR 3.3bln (9MFY21: PKR 2.5bln); sales are done locally. Margins and net profitability are enhanced attributable to favourable sector dynamics. In the current year, lower finance costs supported profitability. Non-core expenses emerged in 9MFY22 and should be contained going forward. The financial risk matrix reveals moderate leveraging with room for improvement in coverage.

Further augmentation in core coverage will provide comfort with approaching scheduled principal repayments. The equity base recorded limited growth in the last few years due to restricted profitability and limited funds retained. The assigned ratings derive comfort from an experienced management team, the strong financial muscle of the Sponsors, and their timely support to the Entity in the form of subordinated loans. Going forward, the Company is planning to acquire debt to finance CAPEX. Material improvement in cash flows in line with upcoming debt obligations remains imperative.

During 9MFY22 (Jul21-Mar22), Pakistan textile exports surged to $14.2bln (recording a growth of 25%) as compared to $11.3bln in the same period last year. This is attributable to an increase in demand for textile products internationally and the channeling of export orders toward the Pakistani market. On a YoY basis, the exports of raw cotton, cotton (carded or combed) and cotton cloth recorded notable growth. However, month on month basis, textile exports have declined by 3.5%.

The ratings are dependent on the Company’s ability to sustain its operations in prevailing conditions. Significant deterioration in revenues and/or debt coverages due to the prolonged downturn leading to higher financial risk or subdued profitability will have a negative impact on the ratings. Saif Group’s support of the Company will remain critical.

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