PACRA Assigns Positive Outlook to Mount Fuji Textiles Limited.

The assigned ratings reflect the adequate presence of Mount Fuji Textiles Limited (“MFTL” or “the Company”) in the textile industry of Pakistan. The product diversity of MFTL is primarily vested in garments followed by home textiles. In the home textile category, bed sheets are their prime selling product and others include processed fabric, foldable mats, etc. During 6MFY24 the top line of the Company has shown impressive growth and stood at PKR 5,591mln (FY23: PKR 6,732mln) mainly contributed by the export segment. The Company keeps intact its revenue stream in dollar terms providing comfort to the business sustainability. The international clientage of Mount Fuji is comprised of stable entities that exist in multiple export destinations which primarily include Poland, Germany, United Kingdom, and United States of America. During FY23, the margins of the Company were slightly under-stressed mainly on the back of a dip in international product demand patterns, expensive raw material procurement, inflated energy tariffs, and finance costs. However, in 6MFY24 the Company regained momentum both in terms of competitiveness pricing and volumetric sales which ultimately translated into an ameliorated profitability matrix. The Company has recently approved a CAPEX and is in the process of gradual installation of Solar panels to manage energy cost risk. The board is dominated by the sponsoring family and acts more as an execution role as they possess considerable industry-specific exposure. The management of the Company is mindful to keep aligning their performance both in terms of projected topline and profitability. The financial risk profile of the Company is moderate considering the leveraged capital structure and slightly stretched working capital management. The cashflows and coverages of the Company are considered adequate and have shown improvement during 6MFY24. The outlook on the ratings is "positive" which reflects the prospective transition to the higher ratings. The key elements are generated consistent profitability over the years which beefed up their pure equity levels and created product diversity in the textile value addition segment to expand their export avenues and keep intact their business volume despite economic challenges.
The Pakistan textile industry size is estimated to be PKR 2.62Trn in LSM (Large Scale Manufacturing) ~3.0% of the total GDP as of FY23. The composite & garment segment in the textile sector has a contribution of ~ PKR 1.6Trn mainly dominated by knitwear, readymade garments, bedwear, and towels followed by PKR 775bln from spinning and PKR 637bln from weaving. The escalation in energy tariffs & finance costs, PKR devaluation, and ensuring the availability of optimum quality raw materials are prime challenges specific to the industry to assess the international market and stay price-wise competitive
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. 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 principal activity of the company is the manufacturing and sale of high-quality healthcare and home textile products, and retail fashion garments. 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.