Press Release

VIS Reaffirms Entity Ratings of The Crescent Textile Mills Limited

Karachi, February 16, 2023: VIS Credit Rating Company Limited (VIS) has reaffirmed the entity ratings assigned to The Crescent Textile Mills Limited (Crestex) at ‘A-/A-2’ (Single A Minus/A-Two). The medium to long-term rating of ‘A-’ denotes good credit quality; protection factors are adequate. Risk factors may vary with possible changes in the economy. The short-term rating of ‘A-2’ denotes good certainty of timely payments. Liquidity factors and company fundamentals are sound. Access to capital markets is good. Risk factors are small. Outlook on the assigned ratings is ‘Stable’. Previous rating action was announced on December 31, 2021.

The ratings assigned to Crestex take into account its association with ‘Crescent Group’; one of the oldest conglomerates in Pakistan with business interests in textile, sugar, particle board, steel, and financial services. The ratings incorporate diversification of revenue stream into spinning, weaving, processing and made-up segments. Exports sales comprised processed fabric and home textile made-ups, which accounted for nearly half of the net sales during FY22. Local revenues largely emanate from yarn and greige fabric sale.

During the outgoing year, the topline exhibited growth in line with higher average prices despite overall decrease in volumetric sales. Gross margins improved primarily on account of enhanced margins related to home textile and processing segment driven largely by higher product prices, better orders selection along with inventory gains emanated from timely procurement of raw materials at favorable prices. Net margins also improved with considerable exchange gain realized during FY22. Liquidity profile is underpinned by adequate debt service coverage and working capital management. The ratings factor in moderately leveraged capital structure. The company has mobilized additional long-term loan in FY22 and the ongoing year to finance expansion in its weaving segment which is expected to become operational in April’23.

The Rupee depreciation and favorable product prices continued to support the topline and gross margins during 1QFY23. Nonetheless, revenue growth and profitability are expected to remain under pressure amidst demand compression led by slowdown in global markets. Additionally, all time high inflation suppressing purchasing power of the masses, high markup rates, unstable forex parity and depleting foreign exchange reserves will remain major challenges. The ratings will remain sensitive to managing liquidity and debt service coverage while maintaining capitalization indicators at adequate levels.

For further information on this rating announcement, please contact Ms. Tayyaba Ijaz, CFA at 042-35723411-13 (Ext. 8005) and/or the undersigned at 021-35311861-66 (Ext. 207) or email at info@vis.com.pk

Sara Ahmed
Director

VIS Entity Rating Criteria: Corporates (August 2021)
https://docs.vis.com.pk/docs/CorporateMethodology202108.pdf

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 2023 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .