Press Release

JCR-VIS assigns Initial Ratings to Premium Textile Mills Limited

Karachi, July 19, 2018: JCR-VIS Credit Rating Company Limited (JCR-VIS) has assigned initial entity ratings of ‘BBB+/A-2’ (Triple B Plus/A-Two) to Premium Textile Mills Limited (PRET). Outlook on the assigned ratings is ‘Stable’.

PRET commenced operations in 1989 and is involved in the production of dyed yarn and heather greige products. The company started spinning operations with 12,230 spindles, over the years the spindle count has increased to around 77,000 with production of approximately 20 million kilograms of yarn annually.

Ratings assigned to PRET take into account the company’s established track record in the textile spinning industry, improving profitability profile and adequate liquidity indicators. However, ratings are constrained by cyclicality in earnings profile and high leverage indicators. Current financial profile remains adequate to sound; however, with the implementation of the Balancing, Modernization, Replacement & Expansion (BMRE) project largely aimed towards improvement in efficiency; leverage and cash flow profile are projected to weaken over the rating horizon.

A certain amount of risk is inherent in the spinning industry with respect to the volatility observed in the cotton prices which has an effect on the margins of PRET. The financial profile of the company may vary with industry cycle. Last two years with regards to the industry have been beneficial for the company in the form of higher yarn prices. Gross profit of PRET for 9M18 and FY17 increased on the back of favorable price adjustment in sales relative to cost.

Improved profitability has resulted in healthier cash flow generation which had a favorable impact on the debt servicing coverage and Funds From Operations (FFO) in relation to long-term debt multiples of PRET during FY17. The same have declined at end 9M18 owing to higher utilization of borrowings. PRET’s short term borrowings have increased in line with the company’s inventory levels. Leverage indicators have remained on the higher side since the last two years and have increased further in the ongoing year to fund the BMRE project.

For further information on this rating announcement, please contact the undersigned (Ext: 208) at 021-35311861-70 or fax to 021-35311872.

Atiq Anwar Mahmudi
Applicable Criteria: Industrial Corporates (May 2016)

Information herein was obtained from sources believed to be accurate and reliable; however, JCR-VIS Credit Rating Company Limited JCR-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.JCR-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.JCR-VIS is not an NRSRO and its credit ratings are not NRSRO credit ratings.JCR-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 2018 JCR-VIS Credit Rating Company Limited. All rights reserved. Contents may be used by news media with credit to JCR-VIS.

JCR-VIS Credit Rating Company Limited