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Moody's upgrades ratings outlook of Texhong
15
Jul '16
Courtesy: Texhong
Courtesy: Texhong
Moody's has upgraded the ratings outlook of China based Texhong Textile Group Limited from negative to stable, on back of the Chinese company's positive profit alert for its earnings in the first half of 2016.

On 8 July, Texhong announced that it expected to achieve a substantial increase in the first six months of 2016 earnings as against the comparable period in 2016.

According to Texhong, the earnings have been mainly driven by strong sales volume and an improvement in its gross margin.

The higher sales volume in the first half of this year was partly driven by its new capacity of 250,000 spindles in Vietnam, which commenced production in the second quarter of 2016.

"Texhong's improved earnings in the first six months of 2016 are within our expectations. It was these expectations that resulted in our outlook change to stable from negative in March 2016," said Chenyi Lu, Moody's senior analyst.

In addition to the new capacity in Vietnam, the company plans to add 450,000 spindles in Xinjiang, China, which will commence production in 3Q 2016.

Moody's expects Texhong's adjusted debt/EBITDA to decline to about 3.5x over the next two years from 4.0x in 2015, owing to expected positive cash flow from operations and lower capital expenditure.

Currently, Texhong has 16 yarn production facilities, of which, 13 are in China, three in Vietnam and one in Cambodia. (AR)

Fibre2fashion News Desk - India


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