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PACRA Assigns Initial Entity Ratings to Samad Rubber Works (Pvt.) Limited

Rating Type Entity
(25-Nov-22 )
Action Initial
Long Term BBB+
Short Term A2
Outlook Stable
Rating Watch -

Samad Rubber Works (Pvt.) Limited (‘SRW’ or ‘the Company’) is primarily engaged in the manufacturing and marketing of Apparel (woven garments in Denim & Twill and Outerwear), Unicellular Foams, Contact-Based Adhesives, followed by the supply of rubber/non-rubber & specialty fabric items to Pakistan Armed Forces, and technical textile products (stitched, inflatables, & fabricated). The ratings reflect SRW’s deep-rooted presence in local rubber and adhesive industry underpinned by the foundation stone for Samad Group – a known brand for industrial and consumer adhesives, retaining cumulative segment share of around ~25%. With its longstanding history, SRW has built itself as an acclaimed player through channeling innovative products to defense/military. The Company is a compliant supplier of unicellular closed-cell foams to sporting industry, explicitly capturing ~90% market share by supporting Football manufacturing in Pakistan. As an affirmation of multi-brand strategy under its umbrella, the Company further entered into complete cut-to-pack denim woven garments, maintaining less than ~2% share in country’s total apparel exports in the face of direct competition from textile giants. Industries in Pakistan undergo considerable production cost pressures amidst high international energy prices and currency devaluation, thus challenging overall growth. Subsequently, for the Company, most of the materials for diversified business units are not procured locally having a direct impact on margins, partially offset by the ability to pass on price hike to customers. Further, the Company’s strategic business unit of apparel is export-oriented and gets benefited in line with exchange rate volatility and rising international demand of fashion garments. As per management report, SRW’s revenues witnessed a significant growth of ~63% at end Jun-22 on back of better prices and more volume in core business segments; apparel sales contributed the highest, followed by foam, adhesives, defense, & a minimal portion from technical textile. Profitability matrix of SRW is aligned with topline improvement. With precise manufacturing facilities and implementation of sophisticated MIS, SRW has led to achieve operational efficiency. Financial risk profile of the Company is demonstrated by efficient working capital management, healthy coverages, and comfortable cash flows. SRW’s capital structure is low leveraged, mainly encompassed STBs. Going forward, the execution of good governance practices coupled with formal controlling structure shall be required to ensure compliance at all levels and smooth running of business units.
The ratings are dependent on sustenance of Company’s position in its respective business niches and consistent growth under challenging environment. With revenue growth, profit margins and prudent financial performance shall remain imperative.

About the Entity
Samad Rubber Works (Pvt.) Limited (formerly known as Pakistan Rubber Industries) is a private limited concern established in 1948. Mr. Abdus Samad (Late) laid the foundation by entering into manufacturing of rubber hoses & setting up latex foam unit. In 1962, following a split in family business, Samad Group evolved as a diversified business empire by serving diversified sectors (Adhesives, Defense, Foam, Apparel, & Technical Textile). Presently, the ownership entirely lies with sponsoring family (two sons of Mr. Samad); Mr. Fazal Haq (Chairman) owns ~40% whilst Mr. Abdul Sami (CEO) maintains ~60% stake. Mr. Sami holds over three decades of industrial exposure. He is actively involved in the business and assisted by members of 3rd generation along with qualified team of professionals.

The primary function of PACRA is to evaluate the capacity and willingness of an entity to honor its obligations. Our ratings reflect an independent, professional and impartial assessment of the risks associated with a particular instrument or an entity. PACRA's comprehensive offerings include instrument and entity credit ratings, insurer financial strength ratings, fund ratings, asset manager ratings and real estate gradings. PACRA opinion is not a recommendation to purchase, sell or hold a security, in as much as it does not comment on the security's market price or suitability for a particular investor.