Press Release

JCR-VIS Assigns Initial Entity Ratings to Artistic Milliners (Private) Limited
 

Karachi, December 28, 2017: JCR-VIS Credit Rating Company Limited (JCR-VIS) has assigned initial entity ratings of ‘AA-/A-1’ (Double A Minus/A-One) to Artistic Milliners (Private) Limited (AML). Outlook on the assigned ratings is ‘Stable’.

AML is the country’s leading denim and garment manufacturer with vertically integrated operations. The company manufactures yarn, denim fabric and garments and operates through 14 units located at Korangi and Landhi in Karachi, Pakistan. Sales mix of the company is almost entirely export oriented with revenues comprising a mix of denim fabric and garments. In order to cater to growing demand, the company is undergoing expansion in both the fabric and the garment divisions. Sponsors have over 5 decades of experience in the textile sector with extensive experience in denim fabric and garment segment.

Business risk profile is supported by stable and growing demand for denim fabric and garments. This is also reflected by continuous growth in sales and largely stable margins which is in contrast to other textile players in the country. However, local and international expansion by major players is expected to keep pricing power and hence margins under pressure. The company’s operations are also concentrated with exposure entirely to the denim industry which might significantly impact business risk profile in case of change in demand patterns or any other industry specific factors. JCR-VIS expects demand for denim products to remain stable over the medium term. Other key business risk factors include efficient procurement of cotton and weakening in law and order situation.

Assessment of financial risk profile incorporates the company’s conservative financial policy as reflected in low leveraged capital structure, healthy profitability indicators and strong liquidity profile. Going forward, profitability will be a function of double digit growth in revenues. However, despite rupee depreciation during the ongoing year, JCR-VIS expects gross margins to remain under pressure in view of decreasing selling prices. Liquidity profile of the company is considered strong in view of healthy cash flows in relation to outstanding obligations, profile of trade debts which remain within manageable levels, and strong debt servicing ability. Capitalization levels have grown at a healthy pace over the last three years owing to profit retention. While remaining within manageable levels, JCR-VIS expects leverage indicators to increase on the back of higher debt levels to fund expansion and increase in dividend payments. The assigned ratings are subject to maintaining projected financial indicators within benchmarks for the assigned ratings.

Recently, the company has also diversified into the power sector through its wholly owned subsidiary Artistic Energy (Private) Limited (AEL) which will set up a Wind Power Plant having an installed capacity of 50MW. Diversification in the power sector will continue through an additional 50MW wind power project. In addition, the group has LOI for 25MW Hybrid Solar project and 50MW Solar power project. Diversification into hydel power generation is also planned.


For further information on this rating announcement, please contact the undersigned (Ext: 207) or Mr. Javed Callea (Ext: 201) at 021-35311861-71 or fax to 021-35311872-3.




Mr. Jamal Abbas Zaidi
Advisor

Applicable Rating Criteria: Industrial Corporates (May 2016)
http://www.jcrvis.com.pk/docs/Corporate-Methodology-201605.pdf

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Information herein was obtained from sources believed to be accurate and reliable; however, JCR-VIS Credit Rating Company Limited (JCR-VIS) does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. JCR-VIS, the analysts involved in the rating process and members of its rating committee do not have any conflict of interest relating to the rating(s)/ranking(s) mentioned in this report. JCR-VIS is not an NRSRO and its credit ratings are not NRSRO credit ratings. JCR-VIS is paid a fee for most rating assignments. This rating/ranking is an opinion and is not a recommendation to buy or sell any securities. Copyright 2017 JCR-VIS Credit Rating Company Limited. All rights reserved. Contents may be used by news media with credit to JCR-VIS.

JCR-VIS Credit Rating Company Limited