Press Release

VIS Maintains Entity Ratings of Akram Cotton Mills Limited
 

Karachi, Jun 29, 2021: VIS Credit Rating Company Limited (VIS) has maintained the entity ratings of Akram Cotton Mills Limited (ACML) at ‘BBB/A-2’ (Triple B/A-Two). Outlook on the ratings has been revised from ‘Rating Watch-Negative’ to ‘Stable’. Long Term Rating of BBB reflects adequate credit quality; protection factors are reasonable and sufficient. Risk factors are considered variable if changes occur in the economy. The short term rating of A-2 indicates 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 24, 2020.

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 revision in rating outlook reflects maintenance of the financial risk profile in line with the parameters for the assigned ratings. Given the COVID-19 induced disruption, the company witnessed reduction in topline and incurred net loss owing to volumetric decrease in sales and higher financial charges in FY20. However, subsequent recovery in demand, increase in yarn prices and efficient procurement of cotton have resulted in considerable improvement in profitability during 9M’FY21. Continuation of improvement trend in profitability is considered important from the ratings perspective. Liquidity profile has varied in line with the profitability of the company. The assigned ratings incorporate adequate debt servicing ability on account of improvement in the cash flows in 9M’FY21. Leverage indicators have increased on a timeline basis primarily on account of higher short term borrowings utilized for inventory procurement. Going forward, the company will incur capex to the tune of Rs. 220m for BMR, out of which Rs. 20m will be financed through internally generated capital, while the remaining amount would be funded through debt financing. Nevertheless, leverage indicators are expected to remain at a manageable level given the projected improvement in profitability and profit retention. Changes in leverage indicators remain a key rating sensitivity going forward.

For further information on this rating announcement, please contact Ms. Sara (Ext: 202) or the undersigned (Ext: 201) at (021) 35311861-66 or email at info@vis.com.pk .





Javed Callea
Advisor

Applicable Rating Criteria: Corporates (April 2019)
https://s3-us-west-2.amazonaws.com/backupsqlvis/docs/Corporate-Methodology-201904.pdf

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Information herein was obtained from sources believed to be accurate and reliable; however, VIS Credit Rating Company Limited (VIS) does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information.VIS , the analysts involved in the rating process and members of its rating committee do not have any conflict of interest relating to the rating(s)/ranking(s) mentioned in this report.VIS is paid a fee for most rating assignments. This rating/ranking is an opinion and is not a recommendation to buy or sell any securities. Copyright 2021 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .

VIS Credit Rating Company Limited