PACRA Assigns Initial Entity Ratings to Al-Rahim Textile Industries
Lahore, January 17, 2018 (PPI-OT):Al Rahim Textile Industries (Al Rahim) is a family owned, textile entity that boosts a strong position in towel manufacturing followed by gradual entry in processed fabric. Al Rahim has managed to increase its business profile following expansion at its state of the art production site in Nooriabad, Sindh. Al Rahim is now a leading towel exporter of Pakistan. Al Rahim’s primary business remains towel oriented exports. However, it provides fabric and other processing facilities to its associated company – Al Rahim Retail and to other local manufacturers.
Textile industry overall is witnessing suppressed margins due to international lower commodity prices and higher cost of doing business in Pakistan. However, towel and denim industry continues to surge forward on the back of Pakistan’s cotton which is more suitable for coarse counts linked products. Towel industry continues to give good margins which is reflected in Al Rahim’s profitability.
However, on standalone basis, significant increase in inventory levels following increased production requires prudent working capital management. In FY17, Al Rahim procured long term debt to meet its Capex. Expansion and increased inventory levels caused build-up of financial risk. Nevertheless, it still carries adequate leveraging with good coverages. Going forward, in absence of any further debt-driven expansion and with better working capital management, financial risk profile is expected to become stronger.
The ratings are dependent on sustaining business margins while maintaining financial risk at manageable level. Prudent management of cash flows to meet financial obligations will remain critical. Strengthening of corporate and governance framework and timely completion of related exercise in a timely manner is critical to hold ratings.
For more information, contact:
The Pakistan Credit Rating Agency Limited (PACRA)
Awami Complex, FB1, Usman Block New Garden Town,
Lahore – Pakistan
Tel: +9242 586 9504 -6
Fax: +9242 583 0425