PACRA Maintains the Entity Ratings of Prosperity Weaving Mills Limited

The assigned rating of Prosperity Weaving Mills Limited (“PWML”' or 'the Company') reflects the prominent profile of the Nagina Group - the sponsoring group, one of the oldest medium-sized textile groups in Pakistan. Three publicly listed Companies primarily operate under the Nagina group's umbrella, including Nagina Cotton Mills Limited, PWML & Ellcot Spinning Mills Limited. The Group operates in the spinning sector through Nagina Cotton Mills Limited and Ellcot Spinning Mills Limited, as well as in the weaving sector through PWML. In recent years, the Company has increased its production capacity along with replacing some of the old looms under BMR projects to improve operational efficiency. The Company has a total energy requirement of 7.0 MW, in PWML power system 1.5 MW solar power plant is installed and the rest is met through gas-based internal power generation of 5MW and 0.5MW furnace oil-based generators. During 9MFY24, the Company’s revenue increased by 28% QoQ to stand at PKR 14.0bln; driven by higher capacity utilization (~97.5%) accompanied by better product pricing trends both in the local and export segment. The business sustainability takes comfort from the Company’s association with stable entities as their top clientage. Moreover, exports constitute 32% of total revenue (9MFY23: 40%). The Company’s major export base in terms of volumes is in Europe followed by North America, Far East China, and Turkey. The dilution in margins is mainly attributed to expensive raw material procurement and escalated energy tariffs coupled with magnifying finance costs. The Company recorded a net profitability of PKR 38mln during 9MFY24 (9MFY23: PKR 126mln). The financial risk profile of the company is considered adequate, with an aptly managed working capital cycle. The Company's management is mindful of improving financial performance while keeping the financial matrix intact. The Company has maintained a leveraged capital structure with adequate coverages and cashflows. The country's textile exports reached USD 15.2bln during 11MFY24 compared to USD 14.7bln in the same corresponding period, indicating a modest growth of ~0.03% on a YoY basis. In value terms, the Composite & Garments segment had the highest contribution of USD 8.5bln, followed by the Weaving segment at USD 5.7bln and Spinning segment at USD 0.9bln. The global economic slowdown subdued the demand patterns and consumption trends in the international market. During 1QFY25 the impact on the cotton crop will escalate the requirement for imported cotton to fill up a gap in local raw cotton demand. However, the gradual decline in the interest rates is anticipated to provide comfort to the local industry.
The ratings are dependent upon the sustained market position of the Company. Moreover, the company’s ability to generate enough cash flows to fulfill its financial obligations is critical, along with prudent investment decisions. The equity base of the Company is satisfactory and should be beefed up, going forward.

About the Entity
Prosperity Weaving, incorporated in 1991 as a public limited company, has an intact business profile and is engaged in the production of greige fabric and operates with a weaving unit comprising 382 looms. The majority stakes (87.49%) of the Company are held by Nagina Group, through group companies and sponsoring individuals. The Company's board comprises ten members. Mr. Shahzada Ellahi Shaikh is the Chairman of board. The management team is headed by the CEO Mr. Raza Ellahi who is well-versed in the textile business providing requisite acumen.