Press Release

JCR-VIS Reaffirms Ratings of A /A-2 of Sapphire Textile Mills Limited

Karachi, October 12, 2010: JCR-VIS Credit Rating Company Limited (JCR-VIS) has reaffirmed the entity ratings of Sapphire Textile Mills Ltd. (STML) at ‘A’ (Single A) for the medium to long-term and ‘A-2’ (A Two) for the short-term. Outlook on the medium to long-term rating is ‘Stable’.

Despite several challenges faced by the spinning sector during 2010, the year was an exceptional one in terms of sales growth and significant improvement in margins. This has been largely supported by rupee devaluation and improved prices owing to supply deficit in international market which allowed the sector to remain competitive amidst recession. The industry is currently faced with the increase in raw material prices due to domestic and international trends. Given the increase in interest rates, anticipated additional fiscal levy and increasing competition in the global market, the performance of the sector may come under some pressure relative to FY10.

The reaffirmation of ratings, takes into account, the company’s strong financial profile and manageable levels of leverage. STML has posted significant growth in sales with improved margins during FY2010. The recent developments on the economic front may affect the margins of the company in the ongoing year. Given the adequate debt servicing coverage and expected cash flow generation the company is not likely to face short term pressure on liquidity, with noteworthy levels of liquidity also kept aside in the form of marketable securities.

For further information on this rating announcement, please contact Mr. Javed Callea (Ext: 501) or Ms. Sobia Maqbool (Ext: 506) at 021-35311861-70 or fax to 021-35311873.

Faheem Ahmad
President & CEO

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 2010 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