The Pakistan Credit Rating Agency Limited
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Raniya Tanawar

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PACRA Maintains Entity Ratings of Ibrahim Fibres Limited

Rating Type Entity
(08-Feb-21 )
(08-Feb-20 )
Action Maintain Upgrade
Long Term AA AA
Short Term A1+ A1+
Outlook Stable Stable
Rating Watch - -

The ratings reflect Ibrahim Fibres’ long standing and sustained position as a leading player in the local polyester staple fibre (PSF) industry. The year 2020 has been an unprecedented year for the entire globe. The industrial segments in our country had to bear operational challenges as a consequent to complete lockdowns on account of COVID-19 outbreak in the first half of 2020, hence adversely impacting the demand cycle while reciprocating in the revenue base of the company. In previous years, imposition of anti-dumping duty on PSF imported from China since Oct-15 has supported volumetric growth and margins, which is expected to continue in the future. Volatility in crude oil prices and effects of pandemic resulted in fluctuating PSF prices and inventory losses, resulting in a decayed Company’s core margins and profitability on a YoY basis. However, post ease of lockdown the industry bounced back with strong domestic demand, in addition to enhanced yet efficient production, performance is expected to recover and close at a positive note. Furthermore, the Company has undergone expansion of spinning capacity by installing a state-of-the-art 100,320 spindles plant which has successfully achieved its commercial operations during FY20 and already operating at full capacity since Nov'20. The later results are expected to depict much improved picture. The expansion is being undertaken with a mixture of debt and internally generated cash flows. Defying all odds, the Company's financial profile remains strong, accentuated by strong working capital management, low leveraging and moderate 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.

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; currently these facilities includes annual production capacity of 390,600 tons for PSF and 240,192 spindles for Yarn. 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.