VIS Reaffirms Entity Ratings of Blessed Textiles Limited at 'A/A-1'; Outlook Remains Stable.

Karachi -- VIS Credit Rating Company Limited (VIS) has reaffirmed the entity ratings of Blessed Textiles Limited (BTL) at 'A/A-1' (Single A/A-One) with a stable outlook. This reaffirmation reflects BTL's commendable credit quality and strong protection factors in the medium to long term, coupled with a high certainty of timely payment in the short term. Despite various challenges in the global and local textile industry, BTL maintains its strong position with a diversified client base and robust financial practices.

The 'A' rating for BTL signifies good credit quality and adequate protection factors. It takes into account the company's 36-year history of excellence in yarn and fabric production and trade, both in domestic and international markets. Furthermore, BTL's strong sponsor group, loyal client relationships, notable governance standards, and recent capacity expansion efforts contribute to its solid financial standing.

The reaffirmed ratings also underscore BTL's resilience in the face of changing market conditions. Strong revenue growth has been achieved, even as export volumes have declined due to rupee depreciation. The company's low-leverage capital structure sets it apart from its peers in the industry. However, BTL has faced challenges such as increased reliance on imported cotton, declining yarn profits, and broader economic and operational difficulties, which have caused margins to return to historical averages.

Additionally, a shift in cash flow patterns and a rise in debt levels have resulted in reduced debt coverage metrics and an extended cash conversion cycle due to higher inventory holding periods. These factors have intensified BTL's short-term financing needs. The company also faces challenges associated with a high-interest rate environment, inflationary pressures, rising raw material costs, and an ongoing energy crisis in Pakistan.

The global textile industry has seen a slump in demand, with Pakistan's textile exports declining by 15% year-on-year in...