PACRA Assigns Initial Entity Ratings to Ahmad Hassan Textile Mills Limited
The assigned ratings of Ahmad Hassan Textile Mills Limited (AHTM) reflect the adequate positioning of the company in the relative universe. The company specializes in the manufacturing of greige and dyed fabric, with an installed capacity of 171 looms. Board comprises eight members; five members are from the sponsor family. The management involves experienced professionals looking after the operations of the company. Sales mix comprises export; local sales comprise indirect export with destinations in the U.S. and Europe. Over the last few years, the company has witnessed a growing trend. During FY22, the company’s revenues increased by 45% YoY to stand at PKR 5,545mln (FY21: PKR 3,816mln), mainly attributable to high-quality products sold. Operating profits and net profitability recorded a sizeable improvement in the recent year whilst margins remain good. The financial risk matrix displays good leveraging and improved coverage compared to last year. As of Jun22, the finished goods of the company recorded a sizable increase. Going forward, with planned capacity expansion, leverage is expected to increase. Hence, prudent management remains vital for the rating. During FY22, Pakistan's textile exports surged to $19.3bln (recording a growth of 26%). In July to August 2022, the cumulative exports of knitwear increased by 15.4% to $1.32 billion; cotton cloth by 4.2% to $580.5 million, and readymade garments by 5.9% to $911.5 million over their exports in the same period of last year. However, bed wear exports were down 2.9% to $780 million, towels 1.7% to $237.3 million, and cotton yarn sales declined by 18%. However, a slowdown is expected in textile demand amid burgeoning inflationary pressures in the exporting destinations, especially in the US and European countries.
The ratings are dependent upon the management's ability to capitalize on growth opportunities in a competitive landscape, operate at an optimal level, and sustain margins, going forward. The company is expected to adhere to conservative financial discipline, which would be crucial to ratings.
Ahmad Hassan Textile Mills Ltd., a listed concern, commenced operations in 1989. The Company is engaged in the manufacturing of greige and dyed fabric. AHTM operates with 171 looms, respectively. The Company caters to its power needs via WAPDA, Gas connections, and as well as an in-house production. The majority stakes (57.06%) of the Company are held by Mr. Javed’s family. The overall control of the Company vests in an eight-member board of directors with the Chairwoman – Mrs. Salma Javed and the CEO – Mr. Muhammad Haris. Five members are from the sponsoring family. Four members are non-executive directors, two directors carry the executive role and two are independent directors. Mrs. Salma Javed serves the role of Chairwoman. The board members have diversified experience and a relatively long association with the Company. Mr. Muhammad Haris, a textile industry veteran, has diversified experience. He is supported by a team of seasoned professionals.