PACRA Maintains Entity Ratings of Saif Textile Mills Limited

Saif Textile Mills Limited was incorporated in 1989 as a Public Limited Company. It is listed on Pakistan Stock Exchange. Saif Textile is associated with Saif Group since its inception. The Group has a presence in the spinning sector through Kohat Textile and Mediterranean Textile. The Company’s production facilities are located in Gadoon Industrial Estate, KPK. The Company is engaged in manufacturing and marketing several varieties of cotton yarn including, melange yarn, dyed yarn, man-made yarn, and raw white yarn. The top line of the Company has reflected growth in the last three years attributable to both volume and prices. During FY22, net revenues clocked in at PKR 12.6bln (FY21: PKR 10.6bln) with the sales portfolio being dominated by local sales. Whereas, in 9MFY23, revenues stood at PKR 8.3bln, marginally lower as compared to the respective quarter of the last year. Net profitability fell to PKR 282mln in FY22 from PKR 527mln in FY21, which was attributed to higher finance costs due to an increase in borrowings and key policy rates. During 9MFY23, the Company’s gross profit significantly decreased to PKR 365mln due to the high COGS coupled with finance costs the Company recorded a net loss. Going forward, the management anticipates that Saif Textile's margins would hold steady in the future. The company provides goods to a large number of downstream export-oriented businesses in Pakistan that are looking forward to a significant uptick in demand internationally. During 9MFY23, the textile exports were valued at $12.47bln compared to $14.24bln, reflecting a 12% decline YoY - the declining trend has been recorded in the last two quarters. The Country’s textile exports for the month of March clocked in at US$1.26bln, up 7% MoM. The decline in the previous overall exports is driven by attrition in the demand pattern of export avenues. The hike in cotton prices and low demand in international markets is also a challenge. During the month of March, value-added textile exports increased by 6% MoM to US$863mln mainly due to Readymade Garments and Knitwear increasing by 8% and 12% MoM respectively while towels decreased by 6% MoM. Basic textiles witnessed an increase of 8% MoM to US$230mln in Mar-23. In volume terms, Knitwear, Readymade Garments, Bedwear, and Towels increased by 18%, 13%, 5%, and 2% MoM respectively. Moreover, a slowdown is prevailing in textile demand amid burgeoning inflationary pressures in the exporting destinations, especially in the US and European countries. The demand pattern is expected to improve in the upcoming quarters.
Effective financial obligation management while increasing profit margins remains necessary. The ratings could be negatively impacted by any additional debt accumulation and/or deviation from the entity's current business strategy that would increase relevant risks. The Saif group will continue to be crucial to the entity's success, as will its smart debt management. Moreover, it is still crucial to strengthen the equity foundation.

About the Entity
Saif Textile is majorly owned by Saif Holdings (50%) followed by NIT (7%), State Life (4%), and significant free-float (39%). Saif Textile's board comprises seven members, including the Chairman - Mr. Assad Saifullah. Mr. Assad Saifullah. He graduated from the University of Pennsylvania in 2004. The board includes four non-executive directors, and one executive director, while two directors are independent. The board members have vast knowledge and expertise in the textile industry, though diversity in experiences exists as well, ensuring a requisite skill mix for strategic planning. Mr. Nadia Bilal is currently serving as the CEO. She will continue to perform her responsibilities until the conclusion of her notice period on June 30, 2023. Following that, Mr. Sohail Hussain Hydari will assume office as CEO on July 1, 2023.