PACRA Maintains the Entity Ratings of US Apparel & Textiles (Private) Limited

The assigned ratings of US Apparel & Textile (Private) Limited reflect its status as the flagship Company of US Group, one of Pakistan’s prominent textile conglomerates. The Group has established a firm footing in the international denim industry through its state-of-the-art production mechanisms and has built the capacity to produce top-notch quality products. It aims to grow by protecting its core business, moderately diversifying into attractive segments, and implementing good governance for the long-term sustainability of the organization. The group consciously avoids leveraging, a strategic decision overseen by sponsors who provide guidance and professional management to group companies. The company is primarily engaged in manufacturing high-quality ready-made garments that are exported to the USA, UK, and Europe. With experienced professionals in its management, the company operates autonomously with comprehensive reporting. The Company has a robust presence across the broader textile value chain, allowing it to scale business volumes despite macroeconomic challenges and industry-specific headwinds. This is evident by consistent growth in the Company’s topline over the last three years (FY24: PKR 61,159mln; FY23: PKR 51,916mln, FY22: PKR 44,660mln). The growth in sales during FY24 was primarily driven by higher sales volumes, with only a marginal contribution from price increases in USD terms. The removal of energy tariff subsidies, rising inflation, revision of the minimum wage rate, and stability in the USD exchange rate have been key factors impacting the Company's cost structure, leading to a dilution in profitability. Despite these challenges, the Company is still able to generate a reasonable profit after tax of PKR 4.67bln in FY24 (FY23: PKR 9.03bln). US Apparel maintains a favourable capital structure, efficient working capital management and strong coverages, indicating a resilient financial profile and sound credit quality metrics. The Company has no short-term borrowings and has secured an interest-free loan from its holding company to support its net working capital requirements. The textile exports of the country reached USD 16.7bln in FY24, a slight increase from USD 16.5bln in the previous year, reflecting a growth of 0.93% YoY. The highest contribution came from the composite and garments segment at USD 9.1bln, followed by the weaving segment at USD 6.5bln and the spinning segment at USD 1.0bln. During 5MFY25, the textile exports stood at USD 7.6bln. In FY25, the transition from the final tax regime to the normal tax regime is set to impact the profitability matrix of export-oriented units, with a 29% tax on profits and a super tax of up to 10%. The consistent decline in policy rates over the last two quarters, along with the anticipation of further reductions, is expected to provide a cushion in the financial metrics of the industry.
The ratings are dependent on the Company's ability to maintain a strong business profile amidst current circumstances. Preserving low-leveraged capital structure and sound coverages remain imperative.

About the Entity
US Apparel & Textiles (Private) Limited was incorporated on February 18, 1987, as a private limited Company. It is principally engaged in the manufacturing and export of ready-made garments. Mr. Hafiz Mustanser is the CEO designate. He has over two decades of professional experience in the textile industry.