PACRA Assigns Positive Outlook to Crown Textile

The assigned ratings reflect Crown Textile's emerging profile in the highly competitive textile industry. Over the years, it has developed expertise in the value-added segment, and as part of this progression, Crown Textile has commercialized the dyeing facility at Landhi. Crown Textile is primarily engaged in the manufacturing and export of knitted garments to cater to all tiers of society, including Men, Women, and Kids. Crown Textile is a vertically integrated, value-added textile unit that procures yarn and converts it into finished garments through complete in-house processing, including knitting, dyeing, printing, embroidery, washing, cutting, stitching, and more. The financial strength is mainly divesting into the textile and real estate businesses held by a sole sponsor. Crown Textile has no formal board, and all delegation of authority matrix lies with the CEO. Crown Textile has generated a topline of PKR 9.15bln during FY24 (FY23: PKR 8.45bln), 100% of which was contributed by export segment sales. The topline growth is driven by improvement in business volumes with adequate product price dynamics coupled with stability in the USD conversion rate. The prominent customers of Crown Textile include renowned fashion brands such as LPP S.A., Primark Limited, Nikol S.A. (Lefties), and the apparel manufacturer Lamour Global Inc. Exports constitute approximately 37% to the USA, with the remaining share directed to Europe. Crown Textile's approach to navigating the US market amid evolving trade conditions will be evaluated in the upcoming quarters. Crown Textile has sustained its gross margins within a reasonable range over the last three years. Recently, its net margins have shown gradual improvement, mainly due to the rationalization of the operating expenses-to-sales ratio. The management has also implemented renewable energy initiatives over time, including the installation of a 2-megawatt solar power plant, with an additional 1-megawatt plant currently in progress. These efforts aim to optimize energy costs and create a cushion in the cost structure. The financial risk profile of Crown Textile is considered adequate, with a moderately leveraged capital structure and a stretched working capital cycle. The cash flows and coverages have shown improvement. Pakistan's exports to the USA were USD 4.02bln in FY24 and USD 2.83bln in 8MFY25. Recently, the USA imposed a 29.0% tariff on Pakistani exports. The subsequent impact on the broader dynamics of Pakistan's textile industry, as well as the adaptability of textile manufacturers, will be assessed in due course. The positive outlook reflects Crown Textile's leading position among its peer-rated textile universe in both business operations and profitability. This indicates a prospective transition to higher ratings if business fundamentals remain intact through the economic cycle and its performance continues to improve.
The ratings are dependent on Crown Textile's ability to sustain its growth in business volumes while generating sufficient cash flows and maintaining the profitability matrix at an optimal level. The sustainability of margins and improvement in coverages while expanding business volumes remain critical.

About the Entity
Crown Textile, the Partnership Concern, was incorporated in Pakistan under the provisions of the Partnership Act, 1932, and registered with the Federal Board of Revenue on June 14, 2004, as an Association of Persons (AOP). Crown Textile produces over 1mln ready-made garments per month and operates with a capacity of 101 knitting machines, processing 40,000–45,000 kgs of knitted raw fabric and 50,000 kgs of dyed fabric per day. Mr. Muhammad Nadeem owned 98% of the stake, and the rest is with his wife. The position of CEO is vested in Mr. Nadeem. He has more than 3 decades of experience in the textile industry.