April 30, 2020 (PPI-OT)

Following is the text of press release issued by The Pakistan Credit Rating Agency Limited (PACRA)

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The ratings reflect Allawasaya Textile and Finishing Mills Limited's (the Company) association with three industrial families of Multan and demonstrated support of sponsors. Sponsors have a presence in the oilseed extraction industry and other segments of textile value-chain. The Company is involved in the manufacturing and sale of cotton yarn and man-made fibers. The Company enhanced its capacity by 8,500 spindles during the year, though it still remains relatively small. The Company's revenue showed significant increase of ~40% due to increase in production capacity which led to higher sales volume.

Similarly, the margins of the Company showed improvement due to increase in topline and better procurement of cotton at reasonable price indicating an improvement in profitability. However, the COVID-19 will have negative impact going forward and the production and the business will be affected overall. The financial profile of the Company is characterized by moderate leveraging and low coverages. The Company took additional debt to finance BMR. Material improvement in cash flows, in line with upcoming debt obligations, remains imperative.

The 'Rating Watch' signifies COVID-19 outbreak and a challenging economic environment. The entire textile chain is expected to be impacted due to the lockdown in Pakistan and major export destinations of the sector. The demand is expected to contract while eventual resumption of operations and recovery of the sector remains uncertain. The Government and SBP have announced several initiatives to provide support. PACRA will monitor the situation and accordingly take action.

The ratings are dependent upon the sponsor support and management's ability to improve margins, profitability and the Company's competitive position in the industry. This includes keeping the debt levels manageable. Any deterioration in margins or coverages amidst prolonged lockdown will have a negative impact on the ratings.

For more information, contact:AnalystThe Pakistan Credit Rating Agency Limited (PACRA)Awami Complex, FB1, Usman Block New Garden Town,Lahore - PakistanTel: +9242 586 9504 -6Fax: +9242 583 0425Email: hammad.rashid@pacra.comWeb: www.pacra.com

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© Pakistan Press International, source Asianet-Pakistan