Lahore, December 29, 2017 (PPI-OT):Saif textile mills limited (Saif Textile), biggest textile mill of Saif group, provides different kinds of yarn which include, Melange yarn, dyed yarn, man-made yarn and raw white yarn. The company, primarily in spinning business, has also small presence in yarn dyeing business. Despite challenging textile industry dynamics, Saif Textile managed to maintain its optimal capacity while constantly expanding its asset base with the help of leveraging. Textile industry in general and spinning industry in particular continues to suffer from low international commodity prices and high cost of doing business in Pakistan.
Consequently, performance volatility, featured by cotton price fluctuations, is considered high on standalone basis. Saif Textile’s management enhanced and revamped its production capacities with the help of debt, which caused the gross margins to improve, exerted pressure on its financial risk profile. Nevertheless, financial risk is weak reflected by weak coverages, and high leveraged capital structure. Going forward, in absence of improved cash flows, meeting financial needs is expected to remain challenging. The ratings also incorporate the experienced management team and the entity’s association with Saif Group which has demonstrated support in the past.
The ratings are dependent on managing financial obligations while sustaining business margins. Any further debt with shift from current business strategy, impacting the risk profile of the entity, may negatively affect the ratings. Going forward, Saif group’s support to the entity would remain important.
For more information, contact:
The Pakistan Credit Rating Agency Limited (PACRA)
Awami Complex, FB1, Usman Block New Garden Town,
Lahore – Pakistan
Tel: +9242 586 9504 -6
Fax: +9242 583 0425