April 22, 2020 (PPI-OT)

Following is the text of press release issued by VIS Credit Rating Company Limited

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VIS Credit Rating Company Limited (VIS) has maintained entity ratings of Sunrays Textile Mills Limited (SUTM) at 'A-/A-1' (Single A Minus/A-One). The assigned ratings have been placed on 'Rating Watch-Developing' status. Long term entity rating of 'A-' reflects good credit quality, adequate protection factors. Risk factors may vary with possible changes in the economy. Short Term Rating of 'A-1' indicates high certainty of timely payment, liquidity factors are excellent and supported by good fundamental factors. Risk factors are minor. The previous rating action was announced on December 30, 2019.

SUTM operates through a manufacturing facility located in Muzaffargarh, Dera Ghazi Khan Division with 34,896 spindles installed. The company has historically been operating at high capacity utilization levels. During FY18 and FY19, the company replaced its old Chinese machinery with new Japanese ring frames through BMR thereby enhancing productivity and efficiency of its manufacturing unit. Around three fourth of the yarn is produced on courser counts for Chinese denim manufacturers. The remaining is produced on finer counts for local denim, hosiery and knitwear manufacturers.

Assigned ratings to SUTM incorporate the company's association with Indus Group of companies which has an established track record in the textile sector and has strong financial profile. Ratings also take into account SUTM's existing scale of operations, high business risk and strong financial profile. Business risk profile of the spinning sector is considered to be on the higher side due to cyclical and competitive nature of the local industry. Recent sharp dip in cotton prices may result in some inventory losses, going forward. Timing and quantum of which will depend on average prices and quantity carried.

The revision in rating outlook reflects prevailing uncertainty in textile sector dynamics due to coronavirus outbreak, prolonged lockdown, overall contraction in demand and challenging economic environment. It is expected that the entire value chain of the textile industry will be impacted by these developments. Status of the assigned rating is therefore uncertain as an event of deviation from expected trend has occurred; additional information will be necessary to take any further rating action, warranting a 'Rating Watch-Developing' status. Given the low leveraged capital structure and sound financial profile, it is expected that ratings will remain stable post recovery of the ongoing situation; nevertheless as scenario is evolving rapidly, VIS will closely monitor and will accordingly take action to resolve the outlook status.

For more information, contact:Director Compliance and Rating Analytics,VIS Credit Rating Company LimitedVIS House, 128/C, 25th Lane off Khayaban-e-Ittehad,Phase VII, DHA, Karachi, PakistanTel: +92-21-35311861-72Fax: +92-21-35311873Email: bilal@jcrvis.com.pkWebsite: https://www.vis.com.pk/

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© Pakistan Press International, source Asianet-Pakistan