JCR-VIS reaffirms entity ratings of Sapphire Textile Mills Limited

Karachi, June 01, 2015 (PPI-OT): JCR-VIS Credit Rating Company Limited (JCR-VIS) has reaffirmed the entity ratings of Sapphire Textile Mills Limited (STML) at ‘A+/A-1’ (Single A Plus/A-One). Outlook on the assigned ratings remains ‘Positive’. The previous rating action was announced on March 5, 2014.

The ratings assigned to STML take into account the sound financial profile of the institution depicted by a conservative capital structure and comfortable debt servicing coverage ratios. STML is one of the prominent composite units in the country. The company’s continued investment in its production facilities is expected to improve STML’s competitive advantage in the value added segment. Meanwhile, company’s investment portfolio provides support to the revenues in the form of stable dividend income; strategic investment in power sector is expected to augment dividend income in the coming years.

Gross margins, particularly in the spinning sector remained depressed during FY14; STML was able to sustain the impact of the same to an extent on the back of higher margins in other segments. Going forward, margins in textile sector would remain a function of enhanced marketing efforts and efficient inventory management. With exports representing a major share in overall revenues, the company was able to maintain net sales volumes.

Leverage indicators increased moderately as additional long term borrowing was arranged for fabric finishing unit. Long term borrowings may increase further on account of additional investment in group companies. However, the capital structure is expected to remain strong on the back of healthy profit retention by the company and expected returns from the additional investments while ability to service debt in a timely manner is also expected to remain sound.

For more information, contact:
Ms. Sobia Maqbool
CFA
JCR-VIS Credit Rating Company Limited
VIS House, 128/C,
25th Lane off Khayaban-e-Ittehad,
Phase VII, DHA, Karachi
Tel: +92-21-35311861-72
Fax: +92-21-35311873
Email: sobia@jcrvis.com.pk