Press Release

VIS Reaffirms Ratings of Zaman Textile Mills (Pvt.) Limited
 

Karachi, November 29, 2019: VIS Credit Rating Company Limited (VIS) has reaffirmed entity ratings of ‘A-/A-2’ (Single A Minus/A-Two) assigned to Zaman Textile Mills (Pvt.) Limited (ZTML). Outlook on the assigned ratings is ‘Stable’. The long term rating of ‘A-’ signifies good credit quality; Protection factors are adequate. Risk factors may vary with possible changes in the economy. The short-term rating of ‘A-2’ signifies good certainty of timely payment; Liquidity factors and company fundamentals are sound. Access to capital markets is good. Risk factors are small. The previous rating was announced on 22nd November 2018.

ZTML is primarily engaged in manufacturing, processing and sale of yarn and fabric. ZTML plans to install 55,000 spindles, which are expected to be online in March 2020. Subsequently, the entire yarn requirements will be catered through in-house spinning division. The company has replaced 80 looms in FY19 with more efficient looms while an in-house dyeing unit has been set up in the ongoing year. Capacity utilization for spinning and weaving segments remained on the higher side in FY19. Significant initiatives have been taken to enhance operational efficiency, increase automation and focus on value addition.

Assigned ratings incorporate ZTML’s adequate business and financial risk profile. While remaining within manageable levels, leverage indicators and cash flow coverages have weakened on a timeline basis due to sizeable debt undertaken to fund BMR & expansion and extensive working capital requirements. VIS expects liquidity and capitalization indicators to normalize over the rating horizon as benefits of expansion materialize. Ratings remain dependent on maintaining financial indicators within prudent levels.

Topline depicted healthy growth in FY19 while proportion of fabric segment in total sales increased. Proportion of export sales and value added fabric in sales mix is expected to increase, going forward. Gross margins increased in FY19 and are projected to continue to improve on the back of enhance operational efficiencies and increase in proportion of revenues from value added sales.
Despite significant increase in finance cost and administrative overheads, profitability growth remained healthy during FY19 due to significant jump in topline, enhanced gross margins and sizeable tax credits. While cash flows witnessed growth, liquidity indicators have weakened due to sizeable debt drawdown to fund expansion & BMR. Leverage indicators continue to trend upwards. Management’s strategy of profit retention along with lower projected capex from FY21 will result in gradual reduction in leverage indicators, going forward.

For further information on this rating announcement, please contact Mr. Talha Iqbal (Ext: 213) or the undersigned (Ext: 207) at (021) 35311861-66 or email at info@vis.com.pk.






Jamal Abbas Zaidi
Advisor

Applicable Rating Criteria: Industrial Corporates (May 2019)
https://s3-us-west-2.amazonaws.com/backupsqlvis/docs/Corporate-Methodology-201904.pdf

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Information herein was obtained from sources believed to be accurate and reliable; however, VIS Credit Rating Company Limited (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.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.VIS is not an NRSRO and its credit ratings are not NRSRO credit ratings.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 2019 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .

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