PACRA Maintains Entity Ratings of Samad Rubber Works (Private) Limited | Assigns Positive Outlook

Samad Rubber Works (Pvt.) Limited (‘SRW’ or ‘the Company’) is primarily engaged in the manufacturing & marketing of Apparel, Unicellular Foams, Contact-Based Adhesives, followed by the supply of rubber/non-rubber & specialty fabric items to Pakistan Armed Forces, and outerwear products. The ratings reflect SRW’s deep-rooted presence in local rubber & adhesive industry underpinned by the foundation stone for Samad Group – a known brand for industrial & consumer adhesives, retaining reasonable share. With its longstanding history, SRW has built itself as an acclaimed player through channeling innovative products to defense/military. The Company is a compliant supplier of unicellular closed-cell foams to sporting industry, explicitly capturing significant market share by supporting football manufacturing in Pakistan. As an affirmation of multi-brand strategy under its umbrella, the Company further entered into complete cut-to-pack denim woven garments, maintaining minor share in the country’s total apparel exports in the face of direct competition from textile giants. Industries in Pakistan undergo considerable production cost pressures amidst high international energy prices and currency devaluation, thus challenging overall growth. Subsequently, for the Company, most of the materials for diversified business units are not procured locally having a direct impact on margins, partially offset by the ability to pass on price hike to customers. Further, the Company’s strategic business unit of apparel is export-oriented and gets benefited in line with exchange rate volatility and rising international demand of fashion garments. As per management report, SRW’s revenues witnessed a cumulative growth of ~34.1% in FY23 on back of better prices and more volume in core business segments; apparel sales contributed the highest, followed by foam, adhesives, defense, and a minimal portion from outerwear items. During first quarter of FY24, SRW locked revenue at PKR 2.52bln, whereas profitability matrix is aligned with topline improvement. Going forward, the management is diligently working on further enhancing its margins by improving operational efficiency across different SBUs, especially in puffer and apparel segments. Financial risk profile is demonstrated by efficient working capital management, healthy coverages, and comfortable cash flows. SRW’s capital structure is low leveraged, mainly encompassed STBs. Currently, SRW doesn’t intend to any major capital investment / expansion initiatives and for that matter acquiring long-term debt. However, the execution of good governance practices coupled with formal controlling structure shall be required to ensure compliance at all levels and smooth running of business units.
The ratings are dependent on sustenance of SRW’s position in its respective business niches and consistent growth amid changing environment. With revenue growth, profit margins and prudent financial performance shall remain imperative.

About the Entity
Samad Rubber Works (Pvt.) Limited (formerly known as Pakistan Rubber Industries) is a private limited concern established in 1948. Mr. Abdus Samad (Late) laid the foundation by entering into manufacturing of rubber hoses & setting up latex foam unit. In 1962, following a split in family business, Samad Group evolved as a diversified business empire by serving diversified sectors. Presently, the entire ownership lies with sponsoring family (two sons of Mr. Samad); Mr. Fazal Haq (Chairman) owns ~40% whilst Mr. Abdul Sami (CEO) maintains ~60% stake. Mr. Sami holds over three decades of experience and is actively involved in the business. He is being assisted by members of 3rd generation.