PACRA Maintains the Entity Ratings of Ahmed Fine Textile Mills Limited

The ratings of Ahmed Fine Textile Mills Limited (“AFTML” or “the Company”) emerge from its association with Fazal Group, a renowned textile business group with a profound history of operations. The operational infrastructure of AFTML includes spinning, weaving and towel segments accompanied by a total annual production capacity of 40.7mln kgs of yarn, 110.5mln yards of greige fabric and 3.9mln kgs of towels. The Company has undertaken a capital expenditure investment in FY24, installing 1,924 spindles to expand its core business and 14 terry looms as part of its diversification strategy. These enhancements position the Company to meet the growing demand for coarser yarn and terry towels. The Company’s product portfolio comprises various categories of yarn, greige fabric and terry towels. The Company’s topline demonstrated robust growth (FY24: PKR 46.68bln; FY23: PKR 37.03bln), with export and local sales contributing almost equally. In terms of business contribution, weaving is the Company’s foremost segment contributing PKR 31.24bln (FY23: PKR 26.94bln), followed by the spinning segment at PKR 11.36bln (FY23: PKR 6.84bln) and towel segment at PKR 4.07bln (FY23: PKR 3.24bln). The terry towel segment is expanding its presence in the export market and is expected to achieve profitability in the upcoming quarters, contributing to the Company's overall export growth. During 1QFY25, the growth trajectory continued and the Company’s revenue base stood at PKR 12.8bln (1QFY24: PKR 11.8bln). The top customers and suppliers of the Company are well-established and stable entities. Europe is AFTML’s prime export destination, followed by Asia and other regions. The margins witnessed attrition attributed to expensive cotton procurement and escalated energy costs. The management is mindful of energy costs and has already installed a 3.5-megawatt solar which is operational. Further, the installation of a further 7.5-megawatt is still under process, financed through long-term conventional debt which is expected to become operational by the end of FY25. The strategic offloading of PKR 1.5bln short-term conventional borrowings benefitted the profitability matrix of the Company (1QFY25: PKR 336mln; 1QFY24: PKR: 149mln). The Company mainly fuels its working capital requirements through short-term borrowings. The Company has maintained a leveraged capital structure with stretched working capital management. However, the management of the Company is committed to rationalizing its net working capital cycle by optimizing inventory levels and reducing product lead time. The improvement in the coverages will strengthen the Company’s financial risk profile. Looking ahead, the management intends to establish its footprint in the niche market by venturing into a high-potential segment, laser printing on terry towels due to better margins and favorable product pricing.
The ratings are dependent on the strengthening of business operations under the current economic conditions and an adequate financial risk profile. The optimization of the Company’s cost structure and generation of sufficient cash flows to fulfill its financial obligations remains critical for the assigned 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 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 highly qualified and seasoned professionals.