The Pakistan Credit Rating Agency Limited
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Sehar Fatima

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PACRA Maintains Entity Ratings of Liberty Mills Limited

Rating Type Entity
(07-Jul-23 )
(09-Jul-22 )
Action Maintain Maintain
Long Term A+ A+
Short Term A1 A1
Outlook Stable Stable
Rating Watch - -

Liberty Mills is engaged in the business of manufacturing and processing textile fabrics and made-ups. The Company is a family-owned textile unit operating in apparel, institutional, and home textile segments. The Company's emphasis on the well-defined niche of quality-conscious institutional purchasers has resulted in customer concentration, long-lasting relationships with high-profile clients, and consistent quality that aids in risk management. Currently, the company is operating a spinning unit with 10,776 rotors/spindles with a production capacity of 1,600 bags per day and Air Jet weaving unit of 145 looms having a production capacity of 100,000 meters of fabric per day in Nooriabad location. In addition to this the company is also operating another weaving unit of 106 Sulzer looms in Karachi having a capacity of 28,000 meters of fabric per day. The total number of machines in finishing mill / wet processing are 128 having a final production capacity of 350,000 meters per day and made-ups (stitching machines: 1,900 machines). The business profile of Liberty Mills is solid; it derives strength from being a value-added textile operator. The multiplicity in revenue streams acts as a buffer, protecting the Company's profitability to a large extent. The Company has seen a significant boost in topline over the last few years. During FY22, sales were recorded at PKR 50.2bln (FY21: PKR 34.1bln). In 9MFY23, revenue stood at PKR 48.8bln comprising mainly of exports. The Company has managed to cut down its expenses which contributed to a higher gross profit margin and ultimately, recorded a net profitability of PKR 6.6bln. The financial risk matrix of the Company displayed a decent performance as borrowings diluted, whereas the equity base of the Company reflected a robust increase to PKR 32.7bln in 9MFY23. Availed borrowings are under LTFF and TERF (at minimal rates). 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. Several medium and long-term projects are underway at the group- level including (i) Pharmaceutical projects and (ii) Hydro Power projects. Future success will depend on the business's ability to expand in scope and maintain dividends or other sources of income.
During 9MFY23, the textile exports were valued at $12.47bln compared to $14.24bln, reflecting a 12% decline YoY - the declining trend has been recorded in the last two quarters. The Country’s textile exports for the month of March clocked in at US$1.26bln, up 7% MoM. The decline in the previous overall exports is driven by attrition in the demand pattern of export avenues. The hike in cotton prices and low demand in international markets is also a challenge. In volume terms, Knitwear, Readymade Garments, Bedwear, and Towels increased by 18%, 13%, 5%, and 2% MoM respectively. The demand pattern is expected to improve in the upcoming quarters.

About the Entity
Liberty Mills Limited (Liberty Mills) is an unlisted, public limited concern incorporated in 1964. Liberty Mills commenced operations in 1964 as a private limited Company. The Company is owned by the Mukaty family mainly through individuals. Liberty Group holds a ~90% stake in Liberty Power Tech Limited (a 200MW thermal IPP) including ~29% through Liberty Mills. Liberty Wind Power 1 Limited and Liberty Wind Power 2 Limited (of 50 MW each) are wholly owned subsidiaries of the company and are operational. The Board of Directors comprises seven members mainly of the Mukaty family. The CEO, Mr. Muhammad Ashraf (son of Mr. Salim Mukaty) also holds the office of Chairman. The Board comprises five executive directors and two non-executive directors. Mr. Ashraf is supported by an 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.