The Pakistan Credit Rating Agency Limited
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Muhammad Adil Kaleem

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PACRA Maintains Entity Ratings of Ahmed Fine Textile Mills Limited

Rating Type Entity
Action Maintain Maintain
Long Term A- A-
Short Term A2 A2
Outlook Stable Stable
Rating Watch - -

The ratings reflect Ahmed Fine Textile Mills (Ahmed Fine) association with renowned business groups of Pakistan. The Company is primarily engaged in the spinning business and also has presence in weaving segment through a wholly owned subsidiary – Fazal Rehman Fabrics Limited. The ratings incorporate the Company's adequate business operations plus its strong financial profile reflected by reasonable working capital cycle; healthy coverages; and moderately leveraged capital structure. Additionally, Ahmed Fine is planning on enhancing its capacity by 50,000 spindles, thereby improving its business profile to boost revenues. The operations of the Company suffered on account of the COVID-19 outbreak as the entire textile chain came to a halt due to lockdowns in Pakistan and internationally. Production resumed since the Government allowed export-oriented sector to recommence operations, which included Ahmed Fine. The last quarter (April-June) of FY20 remained a challenge as demand was low and yarn prices had plummeted due to the pandemic. Evidently, as per the unaudited management accounts for FY20, Ahmed Fine experienced a decline in sales of ~5% and reduced gross margin (FY20: 12.7%; FY19:13.3%). However, the demand is recovering of late, as economies around the world reopen. Meanwhile prices have also improved on both local and international fronts recently. Nevertheless, in order to relieve pressure on cashflows caused by the pandemic and economic slowdown, the Company availed SBP's moratorium relief and deferred principal repayments for one year. Reduction of 625bps in interest rates by SBP shall also provide respite in this regard.
The ratings are dependent on maintaining business operations under the current economic conditions; and a strong financial profile with healthy coverages and moderate leveraging. The Company’s ability to generate ensuing cash flows to fulfill its financial obligations will remain critical for the ratings.

About the Entity
Ahmed Fine Textile Mills Limited (Ahmed Fine), incorporated in 1989, is engaged in manufacturing and marketing of different varieties of yarn. The company operates one spinning unit having 46,128 spindles, manufacturing coarser-count yarn. Power requirement stands at 6MW; met through captive sources.

The board of directors contain seven members in total. Mr. Rehman Naseem, the CEO, carries with him over two decades of experience in textile sector. He is supported by a team of seasoned professionals, supplementing his capabilities.

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.