Press Release

JCR-VIS Reaffirms Entity Ratings of Union Fabrics (Pvt.) Ltd
 

Karachi, December 26, 2018: JCR-VIS Credit Rating Company Limited (JCR-VIS) has reaffirmed entity ratings of ‘A-/A2’ (Single A Minus/A-Two) assigned to Union Fabrics (Pvt.) Ltd (UFPL). Long Term Rating of ‘A-’ reflects good credit quality with adequate protection factors. Risk factors may vary with possible changes in the economy. Short Term Rating of ‘A2’ signifies good certainty of timely payment, sound liquidity factors and company fundamentals, and good access to capital markets. Risk factors are small. Outlook on the assigned ratings is ‘Stable’. Previous rating action was announced on November 21, 2017.

UFPL deals in the weaving and finishing business segment of greige fabric and home textile product line with more than four-fifth of the sales geared towards the export market. Utilization levels of sizing and weaving unit remained on the higher side while processing mill which came online in March’2017 has depicted improvement in utilization levels on a timeline basis. UFPL through its wholly owned subsidiary Union Apparel (Private) Limited (UAPL) caters to leading brands in the local market and has witnessed sizeable growth in sales in FY18. Going forward, UFPL’s management plans to convert UAPL into a manufacturing concern.

Sales revenue of the company increased by 21% during FY18 with the growth emanating from higher local as well as export sales. On a timeline basis, sales of home textiles in sales mix has increased with the same expected to grow further, going forward. Given the orders in hand, increase in average selling prices (due to increase in value added sales and rupee depreciation) and higher utilization of the processing mill, consolidated sales (UAPL and UFPL) are projected to depict strong double digit growth in FY19. Going forward, greater sales from value-added segment and local currency devaluation are projected to more than off-set the impact of rising yarn prices and finance costs, consequently improving profitability.

Financial risk profile has witnessed improvement on a timeline basis. Equity base of the company has increased on account of profit retention and issuance of right shares for funding expansion. While improving on a timeline basis, gearing and leverage indicators remain on the higher side. Cash flow coverage of outstanding long term debt and debt servicing coverage remain adequate. Going forward, ratings will remain dependent on maintaining high utilization levels while improving leverage indicators and coverages in line with benchmarks for the assigned ratings.

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
Advisor

Applicable Criteria: Industrial Corporates (May 2016)
http://www.jcrvis.com.pk/docs/Corporate-Methodology-201605.pdf

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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 2018 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