Press Release

JCR-VIS Upgrades Entity Ratings of Sadaqat Limited

Karachi, December 27, 2016: JCR-VIS Credit Rating Company Limited (JCR-VIS) has upgraded the entity ratings of Sadaqat Limited (SL) to ‘A/A-2’ (Single A/ A-Two) from ‘A-/A-2’ (Single A Minus/A-Two). Outlook on the assigned ratings is ‘Stable’. The previous rating action was announced on December 31, 2015.

Ratings assigned to SL take into account SL’s sustained performance in the home textile segment. Management’s initiatives to implement production related operational efficiencies are expected to positively reflect on SL’s competitiveness in the international market. SL’s long-term association with customers involving internationally recognized brands has attracted business concentration with them which is effectively being managed by establishing marketing channels in its key export markets as well as new markets.

During FY16, SL export revenue depicted sizeable growth despite a fall in country’s overall exports under home textile segment. Gross margin of the company are strong and have improved during the outgoing year on account of improved prices of finished products, lower average cost of raw material and reduced wastage. Increased margins and higher volumetric sales translated into improved bottom line for the company. SL’s sales are projected to show a healthy growth in the coming years.

Improved profitability reflected in higher Funds from Operations during the outgoing year. Debt levels have increased with higher utilization of short term borrowings to support receivables, inventory and matching working capital requirements. Nonetheless, the company maintains adequate debt coverage while capitalization indicators have also improved on the back of profit retention. Efficiency enhancements from the planned CAPEX are likely to further improve company’s cash flows enabling SL to meet higher debt servicing requirements over the medium to long term.

For further information on this rating announcement, please contact the undersigned at 021-35311861-70 (Ext: 234) or Mr. Waqas Munir, FRM at 042-35723411-13 (Ext: 8010).

Javed Callea

Applicable Rating Criterion: Industrial Corporate (May 2016)

Information herein was obtained from sources believed to be accurate and reliable; however, JCR-VIS Credit Rating Company Limited (JCR-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. JCR-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. JCR-VIS is not an NRSRO and its credit ratings are not NRSRO credit ratings. JCR-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 2016 JCR-VIS Credit Rating Company Limited. All rights reserved. Contents may be used by news media with credit to JCR-VIS.

JCR-VIS Credit Rating Company Limited