Karachi, March 08, 2022 (PPI-OT):VIS Credit Rating Company Limited (VIS) has reaffirmed entity ratings of ‘A-/A-2’ (Single A Minus/A-Two) to Zaman Textile Mills (Pvt.) Limited (ZTML). The medium to long-term rating of ‘A-’ denotes good credit quality coupled with adequate 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 payment coupled with sound company fundamentals and liquidity factors. Outlook on the assigned ratings is ‘Stable’. Previous rating action was announced on January 25, 2021.
Assigned ratings take into account ZTML’s position as a vertically integrated textile composite engaged in manufacturing and sale of yarn and fabric. Major portion of revenue is generated through local sales to leading apparels brands, however management is aiming to increase its export sales footprint. Manufacturing facilities of the Company are located in Kotri site and Landhi Industrial Area, Karachi. The Company has been operating at a high-capacity utilization level in tandem with growing textile demand; which has also aided in achievement of operational efficiencies reflective in improvement in margins over time. During FY21, the Company expanded production capacity within spinning and weaving unit and commenced operations of dying unit. Further capacity expansion in all three segments is underway to cater to growing demand and obtain additional operational efficiencies.
Assessment of financial risk profile incorporates robust topline growth. Growth in revenue has been combination of increase in average selling price and higher volumetric sales, with the latter being larger contributor in revenue growth. Increased production capacity coupled with operational synergies has led to increased margins and enhanced profitability. Liquidity profile albeit remains adequate on account of stretched working capital cycle and elevated capitalization indicators. Leverage indicators are elevated on account of large debt drawdown to fund ongoing expansion. Given further plans of debt drawdown to finance expansion across the value chain, VIS expects gearing and leverage to increase in the medium term. Going forward, ratings remain sensitive to achievement of projected revenues and margins together with deleveraging of balance sheet and maintenance of debt servicing ability.
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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