PACRA Maintains the Entity Ratings of Sapphire Finishing Mills Limited

The ratings of Sapphire Finishing Mills Limited (“SFML” or “the Company”) derive comfort from the established business profile of the sponsors. Sapphire Group is considered one of Pakistan’s largest manufacturers and exporters of textile products. Over the years, the group has evolved from a spinning business into a textile powerhouse, strategically diversifying its business portfolio with expansions into the energy, dairy, and real estate sectors. SFML, a prominent business venture of Sapphire Group, is engaged in fabric dyeing, processing, finishing and garment stitching. The Company is equipped with state-of-the-art production facilities and cutting-edge processes to manufacture premium products that meet the high-quality standards of the top international clientage. The Company’s revenue base is predominantly export-oriented, supplemented by a notable contribution from domestic sales. In terms of revenue contribution, the apparel segment holds an apex position in the business valuation matrix of the Company.
In 1QFY26, the Company’s topline posted a slight reduction to PKR 11.0bln (FY25: PKR 51.5bln; 1QFY25: PKR 13.0bln) despite volumetric expansion in the apparel segment. This dilution reflects a strategic shift aimed at enhancing core operational discipline and optimizing cost-efficiency measures across the production chain. The gross profit margins exhibited a modest improvement despite intense competition from regional players and a challenging global market environment. The Company continues to benefit from its 5.5 MW biomass project, which provides a competitive edge. The Company is also in the process of installing an additional 1MW solar project, enhancing the cumulative solar generation capacity to 2MW, supporting the overall cost structure. Additionally, the income generated from the deployment of funds into group companies and capital market investments has supplemented the profitability matrix. However, these gains were partially offset by a higher taxation burden, resulting in a PAT of PKR 34mln in 1QFY25, compared to a net loss of PKR 261mln YoY basis.
The Company mainly fuels its working capital requirements through short-term borrowings (STB) followed by internally generated cash flows. The financial risk profile of the Company is considered adequate with a stretched working capital cycle. However, the coverage indicators reflected a modest recovery. The Company has maintained sufficient credit lines with banks, depicting adequate financial support. The management is mindful of the prevailing industry challenges and expects to gain momentum by the end of FY26. Furthermore, any retained profits in the upcoming years will be reinvested with no dividend payout to the shareholders.
The ratings are dependent on the intact business operations under the current economic conditions. The improvement in the profit from core business operations and debt coverage metrics remains essential. Any deterioration in the financial risk profile will have a negative impact on the assigned ratings.

About the Entity
SFML, a public unlisted Company, was incorporated on July 25, 2000. It is operating with three subsidiaries outside Pakistan: Daletec AS, Sapphire Finishing Mills USA Inc., and Sapphire Europe BV. The Company is engaged in the processing, dyeing, finishing of fabric and stitching of garments. The board, chaired by Mr. Mohammad Abdullah, is governed by seven members.