PACRA Maintains Entity Ratings of Ibrahim Fibres Limited
Ibrahim Fibres Limited (‘IFL’ or ‘the Company’) is principally involved in the manufacturing & sale of Polyester Staple Fibres (PSF) and Yarn. The ratings reflect IFL’s long-standing presence and sustained fundamentals underpinned by its solid market position as a leading player in the local PSF industry. Globally, the Asia-Pacific region is viewed as principal market for polyester demand on account of expansion in textile sector. Pakistan’s PSF industry has shown growth over the period owing to build up consumption of polyester throughout the textile chain like spinning, weaving, dyeing, composite, etc. Accordingly, IFL is a market leader and captures around 71% of market share followed by Lucky Core Industries Limited (formerly as ICI Pakistan Limited) ~24% and Rupali Polyester Limited ~5%. Like any other sector in Pakistan, PSF sector also operates in an ever-changing environment, wherein its operations and performance are influenced by several macroeconomic factors, including currency devaluation, inflation, hike in policy rates, high energy prices, and unfavorable interest rates. International commodity markets also witnessed a ‘commodity price super cycle,’ resulting in higher costs of doing business. Despite slowdown of domestic economy, IFL managed to record its highest level of sales at end of Sep’22 due to uptick in both sales volume and average selling prices. However, due to increased cost of materials, the same was not entirely transferred into profitability matrix of the Company. Besides, with depletion of forex reserves in Pakistan, it has been quite challenging for the Company to establish L/Cs for the import of core raw materials, thus creating supply-shortage of PSF in local textile sector. Going forward, if evolving economic scenario soothes down, IFL’s revenues are expected to escalate on back adequate orders in pipeline and further expansions in both PSF and Yarn divisions. The expansion shall be undertaken with predominantly internally generated cash flows. Further, imposition of anti-dumping duty on PSF imported from China since Oct-15 has always supported volumetric growth and margins. Profitability profile of the Company during 2022 remained adequate depicting efficient production and positive performance. During last period, the Company managed to retire most of its long-term debt. Thus, making the capital structure low leveraged, mainly comprised of short-term borrowings for its working capital requirements. IFL’s financial risk profile remains strong, accentuated by robust cash flows and healthy coverages. The ratings further incorporate the Company's association with the Ibrahim Group, which has demonstrated strong sustenance.
The ratings are dependent on the Company’s ability to sustain its position, topline growth and profitability amid challenging economic conditions. Optimal utilization of capacity enhancement in spinning and resulting improvement in margins will remain important.
Ibrahim Fibres Limited, incorporated in 1986 and listed on Pakistan Stock Exchange, is engaged in the production & marketing of PSF and yarn. Its production facilities are located at Shahkot near Faisalabad; currently these facilities include annual production capacity of ~390,600 tons for PSF and ~240,192 spindles for Yarn. Ibrahim Group holds majority stake (~90%) in Ibrahim Fibres through Group holding entity, Ibrahim Holdings (Private) Limited.
The Company’s Board of Directors comprises seven members, including the Chairman, Mr. Sheikh Mukhtar Ahmed and CEO, Mr. Mohammad Naeem Mukhtar. Remaining members comprise three Ibrahim Group affiliates and two independent members. All Board members have significant industry related experience.