Press Release

JCR-VIS assigns Initial Ratings to Union Fabrics (Pvt) Ltd

Karachi, November 21, 2017: JCR-VIS Credit Rating Company Limited (JCR-VIS) has assigned initial entity ratings of ‘A-/A2’ (Single A Minus/A-Two) to Union Fabrics (Pvt) Ltd (UFPL). Outlook on the assigned ratings is ‘Stable’.

Union Fabrics (Pvt) Limited was started in 1992 as a small scale weaving unit and currently operates in the home textiles, processing and value added business lines in addition to weaving. The company has 5 plants situated in S.I.T.E area. The company’s greige fabric product and various home textile products form a significant part of its export sales. UFPL has a strong presence in the export market for home textiles and greige fabrics. Large European brands and distributors of home textile products based in Italy, UK and Germany are some of the major clients of UFPL. The company plans to cater to this export market with a larger quantity of its home textile products.

Ratings assigned to UFPL take into account the foreseeable margin improvements, strong export market position and high capacity utilization of its plants. Sustained financial performance of UFPL is also positively taken into account. However, given the company’s status as a private limited company, room for improvement in corporate governance framework is available.

UFPL’s profitability came under pressure in FY17 due to additional finance expense following an increase in the fixed asset base of the company. UFPL’s margins are expected to improve as its finishing unit achieves its optimum production level. The funds generation ability of UFPL remains positive in light of future margin improvements once the finishing unit achieves its optimum production capacity.

The equity base of UFPL improved on the back of increased retained earnings due to limited dividend payout. In addition to this, a sponsor loan was obtained and rights of Rs. 120 million were issued. UFPL’s gearing witnessed an increase on the back of the recent long-term financing. Given the expected cash flows and sound capitalization, leverage indicators are expected to remain manageable going forward.

For further information on this rating announcement, please contact the undersigned (Ext: 207) at 021-35311861-70 or fax to 021-35311872.

Jamal Abbas Zaidi

Applicable Criteria: Industrial Corporates (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 2017 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