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The Pakistan Credit Rating Agency Limited
Press Release

Date
08-Feb-20

Analyst
Muhammad Hassan
muhammad.hassan@pacra.com
+92-42-35869504
www.pacra.com

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This press release is being transmitted for the sole purpose of dissemination through print/electronic media. The press release may be used in full or in part without changing the meaning or context thereof with due credit to PACRA

PACRA Upgrades Entity Ratings of Ibrahim Fibres Limited

Rating Type Entity
Current
(08-Feb-20)
Previous
(09-Aug-19)
Action Upgrade Maintain
Long Term AA AA-
Short Term A1+ A1+
Outlook Stable Stable
Rating Watch - -

The ratings reflect Ibrahim Fibres’ long time leading position in the local polyester staple fibre (PSF) industry. Imposition of anti-dumping duty on PSF imported from China since Feb-16 has supported volumetric growth and margins and is expected to continue in the future. Volatility in crude oil prices impacted the entire petrochemical chain during FY19, resulting in fluctuating PSF prices and inventory losses, resulting in a decline in the Company’s core margins and profitability on a YoY basis. However, given strong domestic demand and efficient production, performance is expected to recover with a recovery in oil prices while currency devaluation is expected to support domestic PSF prices. The Company's spinning segment continues to support its overall profitability. Keeping this in view, the Company is in the process of expanding its spinning capacity by installing a state-of-the-art 100,320 spindles plant. This project has partially come online and is expected to become fully operational in 4QFY20. The expansion is being undertaken with a mixture of debt and internally generated cash flows. The Company's financial profile remains very strong, accentuated by strong working capital management, low leveraging and strong coverages. The ratings further incorporate the Company's association with the Ibrahim Group, which has demonstrated strong support.
The ratings are dependent on the Company’s ability to sustain its margins and profitability. Optimal utilization of capacity enhancement in spinning and resulting improvement in margins will remain important. Excessive borrowings and/or prolonged downturn in margins and/or coverages may impact the ratings.

About the Entity
Ibrahim Fibres Limited, incorporated in 1986 and listed on Pakistan Stock Exchange, is engaged in the production & marketing of PSF and yarn. Its production facilities are located at Shahkot near Faisalabad; these facilities include current annual production capacity of 390,600 tons for PSF and ~190,000 spindles for Yarn. The Company is in the process of expanding its spinning segment with addition of 100,320 spindles, of which 50,160 have been installed. Ibrahim Group holds majority stake (~90%) in Ibrahim Fibres through Group holding company, Ibrahim Holdings (Private) Limited.

The Company’s Board of Directors comprises seven members, including the Chairman, Mr. Sheikh Mukhtar Ahmed and CEO, Mr. Mohammad Naeem Mukhtar. Remaining members comprise three Ibrahim Group affiliates and two independent members. All Board members have significant industry related experience.

The primary function of PACRA is to evaluate the capacity and willingness of an entity to honor its obligations. Our ratings reflect an independent, professional and impartial assessment of the risks associated with a particular instrument or an entity. PACRA's comprehensive offerings include instrument and entity credit ratings, insurer financial strength ratings, fund ratings, asset manager ratings and real estate gradings. PACRA opinion is not a recommendation to purchase, sell or hold a security, in as much as it does not comment on the security's market price or suitability for a particular investor.