PACRA Maintains the Entity Ratings of Ahmed Fine Textile Mills Limited

The ratings reflect Ahmed Fine Textile Mills Limited's (Ahmed Fine) association with the Fazal Group, a renowned business group in Pakistan. The product portfolio of the company comprises different types of yarn, greige fabric, and a variety of towels. The fabric has a major contribution to the revenue followed by yarn and towel. The company has recently penetrated into the value-added segment with the establishment of a towel unit and is also aiming at the expansion of the export business through this. Ahmed Fine has a diverse export base around the globe, out of which Europe and Asia are the major export destinations. During FY23, the revenue increased by 23% to stand at PKR 37bln (FY22: PKR 30bln). The margins reflected attrition due to an inclined cost structure; mainly comprising energy and financial charges. Consequently, the net profit was recorded at PKR 1.3bln (FY22: PKR 2.4bln). During 1QFY24, the topline of the company enhanced by 47% to PKR 11.86bln (1QFY23: PKR 8bln). The bottom line of the company was recorded at PKR 149mln (1QFYFY23: PKR 479mln). The financial matrix indicates a highly leveraged capital structure, moderate coverages, and a stretched working capital cycle. The management expects an improvement in the financial performance in the upcoming quarters by increasing the volume of exports and the efficient procurement of raw materials. Furthermore, the company is in the process of enhancing its solar power capacity which shall curb the energy costs to an extent. Moreover, the management is confident that the company’s capacity utilization levels shall remain optimum. Ahmed Fine is planning on enhancing its spinning capacity by 18,000 spindles, deemed to be operational by the end of CY24 which will improve its business profile to boost revenues. Going forward, the company is planning to expand its product portfolio with the addition of a towel printing unit and a stitching unit for bedsheets. During FY23, textile exports were valued at $16.5 billion as against $19.33 billion, reflecting a 15% year-on-year decline – a downward trend seen since the beginning of FY23. Exports declined due to higher energy prices, cotton shortages, and uncertainty in foreign exchange rates. Taming the demand represented by export routes was also a challenge. During FY23, value-added products such as knitwear, bedwear, towels, and ready-made garments saw an annual decline of 13 percent. Basic textiles, including raw cotton, cotton yarn, and cotton fabrics, declined by 21 percent year-on-year. During the month of June 2023, cotton yarn exports increased by 7% MoM. Value-added exports reported volume growth of 16 percent on a month-on-month basis.
The ratings are dependent on the continuous strengthening of business operations under the current economic conditions; and a sound financial profile with good coverages and moderate leveraging. The Company’s ability to tone down its cost structure and generate ensuing cash flows to fulfill its financial obligations will remain critical for the ratings.

About the Entity
Ahmed Fine Textile Mills Limited incorporated in 1989, is engaged in the manufacturing and marketing of different varieties of yarn, fabric, and towels. The company operates two spinning units having a total capacity of 78,960 spindles, and one weaving unit having a total capacity of 517 looms inclusive of 25 terry looms. The power requirement stands at 20MW; met through captive sources while having the WAPDA as a backup. The board of directors comprises seven members. Mr. Rehman Naseem, the CEO, carries with him over two decades of experience in the textile sector. He is supported by a team of seasoned professionals, supplementing his capabilities.