Pakistan Credit Rating Agency Limited assigns entity ratings to Kohinoor Textile Mills Limited

Lahore, May 15, 2014 (PPI-OT): The Pakistan Credit Rating Agency Limited (PACRA) has assigned a long-term rating of “A-” (Single A Minus) and short-term rating of “A2″ (A Two) to Kohinoor Textile Mills Limited (KTML). The ratings denote strong capacity for timely payment of financial commitments.

The ratings reflect KTML’s dependable business profile emanating from its presence in the broader value-chain of textile business. The company’s strategy is to operate in quality conscious niche market, thereby ensuring stability in core margins. It targets sustainable volumetric growth, albeit gradual.

Meanwhile, KTML has built an efficient management structure that allows all business segments to operate with autonomy, each having independent business approach as well as identifiable financial resources. Nevertheless, the ratings are constrained by stretched financial profile.

Although the company has an adequate working capital cycle, this is burdened by a high quantum of short-term borrowings. Cognizant of this, the management is following a two-pronged strategy i) with limited capacity expansion plans, utilize free cash flows to lower the debt, and ii) improve long-term : short-term debt mix.

The ratings are dependent on the management’s ability to prudently manage the liquidity and debt profile of the company, particularly short-term borrowings, while sustaining business margins. Significant rise in debt levels without support of operational cash flows will have negative implications. At the same time, strengthening of financial profile, being pursued by the management is critical.

For more information, contact:
Hammad Rashid
Analyst
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
Email: hammad.rashid@pacra.com
Web: www.pacra.com

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