PACRA Upgrades Entity Ratings of Mount Fuji Textiles Limited

The rating upgrade of Mount Fuji Textiles Limited (“MFTL” or “the Company”) reflects consistent improvement in the business risk profile over the last five years. Robust organic growth in business volumes, ploughed-back profits, and the onboarding of new export customers with optimal exposure limits have supplemented MFTL's business risk profile. The Company's product portfolio primarily encompasses a diverse range of categories within garments and home textiles. In the garments segment, MFTL's key products include zippers and hoodies, while in home textiles, the focus is on bedsheets. During FY24, the Company's topline exhibited significant growth of 43.3%, reaching PKR 9,645mln (FY23: PKR 6,732mln). This growth was primarily driven by higher demand in the export segment, as the management actively explored new export avenues, along with a moderate contribution from improved product pricing in USD terms. The Company achieved growth in its dollar-denominated revenue, and if this trend continues, MFTL could be classified among the top 100 textile exporters of Pakistan, further reinforcing its long-term business sustainability. MFTL’s international clientele consists of multiple export markets, with key destinations including Poland, Germany, the United Kingdom, and the United States. During 6MFY25, the Company’s margins strengthened due to favourable pricing dynamics and effective cost optimization. The key factors influencing the Company’s cost structure are product price dynamics, revision of minimum wage, escalating finance cost, and an increased tax burden resulting from the transition of export-oriented units from the Final Tax Regime to the Normal Tax Regime (NTR). The company has undertaken capital expenditures (CAPEX) and installed solar panels to mitigate rising energy costs. Additionally, further CAPEX has been approved for the installation of a dyeing facility, aimed at optimizing the cost structure. The management remains committed to aligning performance with projected revenue growth and profitability. The board is dominated by the sponsoring family, with sponsors assuming executive roles due to their considerable industry-specific experience. The Company maintains a balanced financial risk profile, characterized by a moderately leveraged capital structure and aptly managed working capital cycle. The company reported improved cashflows and strengthened financial coverages in FY24, reflecting enhanced financial stability. The implementation of an industrial automation framework at the manufacturing facility, coupled with enhanced internal controls, will strengthen the Company's overall control environment. Despite industry-wide challenges in margin sustainability, the Company has demonstrated resilience and exceptional growth in its core operations.
The ratings are dependent upon the Company’s prudent management of working capital requirements. Improvement in coverages, sustainability of margin and sufficient generation of cash flows from core operations while expanding business volumes remains vital. The governance framework of the Company needs improvement. Adherence to the debt matrix at an optimal level is a prerequisite for assigned ratings.

About the Entity
MFTL is a Public (unlisted) Limited Company incorporated in 1986. The major shareholding of the Company is owned by Mr. Ahmed Ashraf (28.57%) and the remaining b/w three sons of Mr. Ashraf. The sponsors-dominated board comprised of four members, including the Chairman - Mr. Ahmed Ashraf, and the CEO – Mr. Abdul Latif Ashraf.