Press Release

JCR-VIS Assigns Initial Entity Ratings to Naveena Exports Limited

Karachi, April 19, 2018: JCR-VIS Credit Rating Company Limited (JCR-VIS) has assigned initial long term entity rating of ‘A-’ (Single A Minus) and short term rating of ‘A-2’ (A-Two) to Naveena Exports Limited (NEL). Outlook on the assigned ratings is ‘Stable’.

Established in 1989, NEL is engaged in the business of manufacturing and sale of yarn and denim fabric with investment in various sectors including capital market, steel, real estate and renewable energy sector. NEL is amongst the leading exporters of denim fabric from Pakistan. NEL operates through three manufacturing units located at Karachi and Lahore. Capacity utilization of both segments has remained high with revenues of the company almost entirely comprising export sales. Diversification into new export markets is planned through addition of new clients, going forward. The Company is also actively engaged in investing in steel melting and re-rolling mill project through a subsidiary, Naveena Steel Mills (Private) Limited (NSMPL).

Business risk profile is supported by stable and growing demand for denim fabric. However, local and international expansion by major players is expected to keep pricing power and hence margins under pressure. Moreover, significant investment required by customers as part of sustainability initiative is expected to add to cost pressures for denim manufacturers. Given diversification plans, the company’s operations are currently concentrated in the denim sector where demand patterns are a function of international fashion trends. Successful commissioning of diversification initiatives, eliminating construction and cost overrun risk, would be a credit positive rating factor.

Assessment of financial risk profile incorporates the company’s conservative financial policy as reflected in prudent leveraged capital structure, sound liquidity profile and debt servicing ability. Equity base of the company has grown at a 3-yr CAGR of 16% due to profit retention. Around four-fifth of debt carried on the balance sheet is short-term in nature carrying valuation risk on associated current assets. With increase in equity base being higher than growth in debt, leverage indicators have improved on a timeline basis. In the backdrop of various expansion initiatives, maintaining key financial indicators is considered important from a ratings perspective.

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

Mr. Javed Callea

Applicable Rating Criteria: Industrial Corporates (May 2016)

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 2018 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