The Pakistan Credit Rating Agency Limited
Press Release


Muhammad Hassan

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PACRA Assigns Initial Entity Ratings to Sapphire Finishing Mills Limited

Rating Type Entity
(29-May-19 )
Action Initial
Long Term A
Short Term A1
Outlook Stable
Rating Watch -

The ratings of Sapphire Finishing Mills Limited reflect the Company’s strong business profile emanating from international presence in the broader value chain. Rising global demand for value-added textiles and the Company’s penetration into the apparel niche of work wear has led to continuous growth in the topline in recent years. Business risk profile has improved with diversification into fashion apparel segment, which started operations effectively in FY17. Recent currency devaluation has boded well for the Company's export-oriented topline. Margins have improved and are expected to sustain due to recent setting up of power boiler reflecting in reduced power cost. Financial risk profile has improved recently on the back of strong core operations. This is reflected in improved profitability and strong coverages. Over the years, the Company has built a trading portfolio which exposes it to market risk exhibited by recent volatility in the stock market. While leveraging remains high, financing at concessionary rates by the SBP shields the Company against recent interest rate hikes. Ratings further incorporate association of the Company with the well-established Sapphire Group.
The ratings are dependent on sustaining business profile of the Company by maintaining profitability and margins achieved from core textile operations. Sustainability of non-core income and prudent management of surplus funds will be ratings critical.

About the Entity
Sapphire Finishing limited – a public, unlisted entity – commenced operations in 2003 and is engaged in manufacturing of value-added textile products. The Company has made separate business units for its business which includes (i) Processing, (ii) Work wear and iii) Fashion apparel; each being an individual profit center. Sapphire Finishing is wholly owned by the Sapphire Group, directly through individuals (~8%) and group companies (~92%).

Overall control vests with a seven-member Board of Directors, dominated by the sponsoring family: five family members, including CEO, and one non-executive. The CEO, Mr. Yousuf Abdullah, belonging to the sponsoring family, possesses expertise in textile and oversees the Company affairs. He is assisted by a professional and experienced management team.

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.