PACRA Maintains Entity Ratings of AL Textile (Pvt.) Limited

AL Textile (Pvt.) Limited (AL Textile or "the Company"), was incorporated in 2002, as a private limited company and commenced its operations in 2003. AL Textile has a modest operating track record and presence in the textile sector. The Company operates with one spinning unit, having 25,200 spindles installed. The Company’s sales mix is inclined towards the local market and has exhibited growth over the years. During FY22, the top-line clocked at PKR 4.5bln (FY21: PKR 4.3bln) attributable to an escalation in yarn demand. Gross profitability declined to PKR 280mln (FY21: PKR 346mln); a similar trend was observed in the net profitability (FY22: PKR 95mln; FY21: PKR 150mln). During 1HFY23, the Company’s performance recorded sizable dilution where gross and net loss was recorded. The financial risk profile of the Company reveals high leveraging, low coverages and an increased working capital cycle. Rating watch incorporates the Company’s recent dilution in performance and net losses recorded.
During 9MFY23, the textile exports were valued at $12.47bln compared to $14.24bln, reflecting a 12% decline YoY - the declining trend has been recorded in the last two quarters. The Country’s textile exports for the month of March clocked in at US$1.26bln, up 7% MoM. The decline in the previous overall exports is driven by attrition in the demand pattern of export avenues. The hike in cotton prices and low demand in international markets is also a challenge. During the month of March, value-added textile exports increased by 6% MoM to US$863mln mainly due to Readymade Garments and Knitwear increasing by 8% and 12% MoM respectively while towels decreased by 6% MoM. Basic textiles witnessed an increase of 8% MoM to US$230mln in Mar-23. In volume terms, Knitwear, Readymade Garments, Bedwear, and Towels increased by 18%, 13%, 5%, and 2% MoM respectively. Moreover, a slowdown is prevailing in textile demand amid burgeoning inflationary pressures in the exporting destinations, especially in the US and European countries. The demand pattern is expected to improve in the upcoming quarters.

About the Entity
AL Textile is a family-owned business, with a majority stake owned by Mr. Omer Latif (~61%) and the remaining shareholding is distributed equally (~19% each) among his brother and sister. The Company’s board of directors comprises two members, with Mr. Omer Latif as Chairman of the board. He is also the CEO of the Company and is supported by a team of seasoned professionals. The ratings are dependent upon the management's ability to operate at an optimal level and improve profitability, margins, and coverage. The governance framework and independent oversight need improvement. At the same time, prudent management of short-term liquidity remains vital.