PACRA Maintain Entity Ratings of Liberty Mills Limited
Liberty Mills’ ratings reflect the strong business profile of the Company emanating from value-added textile business and topped up with non-core income from investments. This diversity in revenue stream insulates the Company's profitability to an extent by providing a cushion. The Company is a family-owned textile unit operating in apparel, institutional, and home textile segments. The focus of the company on the established niche of quality-conscious institutional buyers has led to customer concentrations and longevity of relationships with big-name clients in addition to sustained quality that helps manage the risk. The holding company structure of the entity strengthens its profile with the investment book constituting ~65% of the equity base. Over the recent years, the company has recorded a sizable increase in the topline. The increase in sales of home textile products has benefited the company and resulted in an enhanced turnover. The Company’s financial risk matrix remained good where the recent increase in leverage was recorded. However, availed borrowings are under LTFF and TERF (at minimal rates). The Company has stepped into large-scale diversification with two ongoing Wind power projects (COD achieved). The Company has expanded its home textile business as well as achieved backward integration. Land of 152 Acres was procured last year (at Nooriabad) and the master complex (from Spinning right up to finished fabric) has been established. Spinning capacity has reached 1,600 bags per day whereas the weaving unit has 144 looms installed. The finishing capacity has been enhanced to 350,000 meters per day. Ratings also incorporate strong sponsor support augmented by a supplementary investment portfolio. Liberty Group - the sponsor - intends to expand its industrial footing with a diversification philosophy. Pakistan Aluminum Beverage Cans Limited, a large long-term project is fully in operation. A number of medium and long-term projects are underway at the group- level including (i) Pharmaceutical projects and (ii) Hydro Power projects. During 9MFY22 (Jul21- Mar22), Pakistan textile exports surged to $14.2bln (recording a growth of 25%) as compared to $11.3bln in the same period last year. This is attributable to an increase in demand for textile products internationally and the channeling of export orders toward the Pakistani market. On a YoY basis, the exports of raw cotton, cotton (carded or combed) and cotton cloth recorded notable growth.
Continued utilization of beefed-up capacities is considered critical. Moreover, improvement in the governance framework will be favorable for the ratings. Going forward, an increase in business size and continuation of dividend/another income stream will remain vital.
Liberty Mills Limited, established in 1964, is in the business of manufacturing and processing textile fabrics (capacity: 350 meters per day) and made-ups (stitching machines: 1,830 machines). The Company is owned by the Mukaty family mainly through individuals. Liberty Group holds ~90% stake in Liberty Power Tech Limited (a 200MW thermal IPP) including ~29% through Liberty Mills. The group has Liberty Wind Power 1 and Liberty Wind Power 2 (of 50MW each) operational as well. Liberty Mills has a seven-member board. The CEO, Mr. Muhammad Ashraf (son of Mr. Salim Mukaty) also holds the office of Chairman. The Board comprises six executive directors and two non-executive directors. Mr. Ashraf is supported by an experienced management team.