Karachi, March 05, 2014 (PPI-OT): JCR-VIS Credit Rating Company Limited (JCR-VIS) has maintained the entity ratings of Sapphire Textile Mills Limited (STML) at ‘A+/A-1’ (Single A Plus/A-One). Outlook on the assigned rating has been revised from ‘Stable’ to ‘Positive’.
The ratings take into account the market position of the company as one of the prominent composite units in the country. The financial year 2013 has remained favourable for the textile sector in general. The increasing trend in prices of yarn and allied products, both locally and internationally, enabled textile companies to post better margins during the year. The impact was more profound for export oriented units which also benefited from Rupee depreciation.
In line with industry trend, STML depicted notable growth in sales with healthy margins across all segments. Revenue stream remains exposed to cyclicality in the demand of yarn that constitutes around 60% of total sales. This proportion has nevertheless declined over time. Improving diversity in sales is likely to provide resilience to the company while strengthening its market positioning.
The company has a conservative capital structure with gearing being less than 1(x). Given the internal cash generation, debt servicing ratios are also at a comfortable level. The company holds an investment portfolio, including strategic investments in various sectors.
The listed equity portfolio provides the company with a liquidity buffer in addition to being a source of dividend income. STML also holds strategic investments. The wind power project set up by the company would entail additional investment of around Rs. 2b over a period of two years that is to be partially financed through debt.
Moreover, additional long term borrowings have also been negotiated for the planned capex in view of the in-house processing facility. JCR-VIS believes that the increase in long term debt, as planned, is not likely to place any stress on the company’s capital structure.
STML has implemented an Oracle based ERP; a separate disaster recovery site has also been identified. Steps to achieve compliance with the requirements of the Code of Corporate Governance are expected to be taken within the regulatory stipulated timeframe.
For further information on this rating announcement, please contact the Mr. Javed Callea (Ext: 501) or Ms. Sobia Maqbool, CFA (Ext: 604) at 35311861-70 or fax to 35311872.
For more information, contact:
Ms. Sobia Maqbool
JCR-VIS Credit Rating Company Limited
Tel: at 021-35311861-70
Fax: +9221 35311872-3
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