Ratings of Treet Corporation Limited

Karachi, February 23, 2015 (PPI-OT): JCR-VIS Credit Rating Company Limited (JCR-VIS) has reaffirmed the entity ratings of Treet Corporation Limited (TCL) at ‘AA-/A-1’ (Double A Minus/A-One). Rating of Participation Term Certificates (TCLTC) has also been reaffirmed at ‘AA’ (Double A). Outlook on the ratings is ‘Stable’. The previous rating action was announced on December 10, 2013.

Treet Group of Companies (TGC) is a consortium of 6 entities and is principally engaged in the manufacturing and sale of razors, razor blades, soaps, corrugated packaging and motorbikes. TCL is the flagship company of the group. The company is the market leader in double edge blades segment with over 35 years of experience in the local market. TCL also has presence in about 26 countries worldwide. The resilience of TGC’s core business activity i.e. razor/blades segment to adverse economic cycles is a key rating factor.

TGC continues to depict organic growth in sales with increase largely manifested in exports. Gross margin also remained healthy despite some decline amidst inflationary impact in FY14. Presently, the bottom line has considerable support from investment income emanating from a sizable listed equity portfolio.

TGC has divested from paper and board mill due to operational issues while the motorbike segment may also be discontinued in near future. Contribution of corrugation and soap in overall profitability has remained notable over the years. Performance of soap segment is likely to improve in line with decline in oil prices.

The company’s total debt (excluding convertible portion of TCLTC) has increased on the back of export refinance and running finance. The same is largely a function of growing exports and local sales. Debt servicing coverage ratios remain within manageable limits while the company has sufficient cash flow coverage against long term debt (excluding convertible portion of TCLTC).

TGC plans to diversify into new business ventures that entail significant funding requirements. Financing is proposed to be mobilized through a combination of debt and equity; the impact of which will be assessed in due course of time.

TCL has segregated the position of the Chairman and Chief Executive Officer in line with governance best practices. Sponsors may consider appointing an independent director to further strengthen the governance structure of the company.

For more information, contact:
Ms. Sobia Maqbool
CFA
JCR-VIS Credit Rating Company Limited
VIS House, 128/C,
25th Lane off Khayaban-e-Ittehad,
Phase VII, DHA, Karachi
Tel: +92-21-35311861-72
Fax: +92-21-35311873
Email: sobia@jcrvis.com.pk

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