Press Release

VIS reaffirms Entity Ratings of Feroze1888 Mills Limited

Karachi, November 13, 2019: VIS Credit Rating Company Limited (VIS) has reaffirmed entity ratings of Feroze 1888 Mills (‘FML’ or ‘the Company’) at ‘AA-/A-1’ (Double A Minus/A-One). The medium to long-term rating of ‘AA-’ denotes high credit quality coupled with strong protection factors. Moreover, risk factors may vary slightly with possible changes in the economy. The short-term rating of ‘A-1’ denotes high certainty of timely payment, liquidity factors are excellent and supported by good fundamental protection factors. Outlook on the assigned ratings is ‘Stable’. The previous rating action was announced on November 12, 2018.

Feroze1888 Mills Limited (FML) is a public listed company and one of the largest terry textile exporters of Pakistan. The Company is a vertically integrated entity engaged in end-to-end process from spinning to product packaging.

In FY19, FML’s operational performance depicted notable improvement; the Company’s topline grew by 34%, whilst significant uptick was also noted in operating margins. The improved earning profile can be attributed to the volumetric growth, enhanced efficiency and cost control measures with the same being supported by the sharp devaluation in local currency.

As the Company continues to invest in balancing, modernization and capacity enhancement, both gearing and leveraging have increased; nevertheless, remain comfortably within VIS benchmarks, while debt servicing coverage is considered very strong. Being an exporter, the Company avails debt at significantly subsidized rates, as a result of which the Company has not been affected by the sharp uptick in benchmark rates. Given a strong earning capability and prudent profit retention, we expect gearing levels to remain within VIS benchmarks for the assigned rating.

The assigned rating also takes into account, FML’s association with the US-based 1888 Mills, which allows the Company with a competitive advantage in terms of outreach in the US market. At present sales revenues depict significant reliance on the US. Cognizant of its sales concentration in the US market, FML has embarked upon diversification of the exports towards other countries, such as Australia, Canada, UAE, UK & Europe.

For further information on this rating announcement, please contact the undersigned at (Ext: 201) at 35311861-70 or fax to 35311872.

Javed A. Callea

Applicable Criteria: Industrial Corporates (May 2016)

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 2019 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .

VIS Credit Rating Company Limited