PACRA Maintains the Entity Ratings of Ahmad Hassan Textile Mills Limited

The assigned ratings of Ahmad Hassan Textile Mills Limited (“AHTML” or “the Company”) reflect its adequate profile within Pakistan's textile sector. AHTML transitioned into a dedicated weaving unit following the demerger of the group and has since then operated as a separate legal entity with no ownership interest in the other Group Company. The Company procures various types of yarn, ranging from 20s count to 100s count, in accordance with client demands and processes them into greige fabric. AHTML mainly produces a variety of fabric types, including Twills, HB, Panama, BFC, Satins, CVC, and Canvas. The management involves experienced professionals looking after the operations of the Company. Since its inception, the Company has managed an intact business risk profile. During FY24, the Company generated a topline of PKR 5.08bln (FY23: PKR 4.33bln), reflecting a year-over-year (YoY) growth of 17.4%. This growth was driven by increased prices for fabric due to improved quality, despite a slight decline in production levels. However, production volumes showed improvement in 1QFY25, with the topline standing at PKR 1.54bln. The sales mix is mainly dominated by local sales contributing ~87.60% inclusive of indirect exports in total gross sales and remaining by export segment. The export destinations of the Company include the U.S., Europe, and Asia. The top customers of the Company include Arshad Corporation (Pvt) Ltd, Dawood Fabrics, US & Dynamo Mills (Pvt) Ltd, Meraj Fatima Fabrics (Pvt) Ltd, H. Y Enterprises, SN International, A.B. Export (Pvt) Ltd, Maypole (Pvt) Ltd. The Company's gross margins experienced a dilution due to expensive raw material procurement and increased energy tariffs. The tightening of commercial credit terms by local yarn suppliers inflated the need for short-term borrowings, resulting in a surge in finance costs and impacting net profitability, which decreased to PKR 40mln in FY24 (FY23: PKR 93mln). The management of the Company is working on some energy efficiency projects, which are expected to optimize energy costs and create some cushion in its cost structure. The Company is considering expanding its business diversification and augmenting its income streams by executing CAPEX in home textiles through the installation of stitching machines, terry looms, and the opening of cattle farms, which is expected to improve its sustainability profile. However, the funding mix and its impact on the financial matrix of the Company need to be analyzed. The financial risk profile of the Company is considered adequate with a moderately leveraged capital structure. AHTML aptly managed its net working capital requirements with a mix of short-term borrowings and internally generated cashflows. The cashflows and coverages of the Company are considered adequate.
The ratings are dependent upon the management's ability to capitalize on growth opportunities in a competitive landscape, operate at an optimal level, and improve margins and coverages, going forward. Adherence to the debt matrix at an optimal level is a prerequisite for the assigned ratings

About the Entity
AHTML a listed concern, commenced operations in 1989. The Company is engaged in the manufacturing of greige fabric, operating with 171 looms. The majority stakes (57%) of the Company are held by Mr. Javed’s family. The Company has a seven-member board, primarily composed of members from the sponsoring family, with two independent directors. The board is chaired by Mrs. Salma Javed while the CEO, Mr. Muhammad Haris overseas Company’s affairs.