Press Release

JCR-VIS Reaffirms Entity Ratings of Artistic Milliners (Private) Limited
 

Karachi, November 14, 2018: JCR-VIS Credit Rating Company Limited (JCR-VIS) has reaffirmed entity ratings of ‘AA-/A-1’ (Double A Minus/A-One) to Artistic Milliners (Private) Limited (AML). Long Term Rating of ‘AA-’ reflects high credit quality, strong protection factors, and moderate risk but may vary slightly because of economic conditions. Short Term Rating of ‘A-1’ indicates high certainty of timely payment, excellent liquidity factors supported by good fundamental protection factors and minor risk factors. Outlook on the assigned ratings is ‘Stable’. Previous rating action was announced on December 28, 2017.

AML is one of the leading denim fabric and garment manufacturers and exporters with vertically integrated operations in Pakistan. The company deals in manufacturing of yarn, denim fabric and denim garments. Over the years, the management has placed significant focus on sustainability initiatives. AML owns Pakistan’s first LEED (Leadership in Energy and Environmental Design) Certified Garment Factory. Sales mix of the company is almost entirely export oriented with revenues comprising a mix of denim fabric and garments. AML is undergoing/completed expansions in spinning, fabric and garment divisions due to growing demand of denim products. Assigned ratings incorporate extensive experience of sponsors and strong franchise enjoyed by AML in the denim sector.

Assigned ratings take into account moderate business risk profile of the denim industry supported by stable and growing demand for denim products. However, local and international expansion by major players is expected to keep pricing power and hence margins slightly under pressure. Given the favorable policies & incentives of the government on enhancing exports and imposition of duties on Chinese exports to USA, there is significant opportunity for denim exporters to enhance exports. In this regard, AML is well positioned to tap this opportunity given the ongoing and completed expansion in all three segments.

Assessment of financial risk profile incorporates healthy profitability indicators, strong liquidity profile and manageable capitalization levels. Profitability of the company improved in the outgoing year on account of increasing sales volumes and average selling prices. Liquidity profile of the company is considered strong in view of healthy cash flows and strong debt servicing ability. Leverage indicators have trended upwards on the back of higher debt levels to fund expansion. Going forward, with no further debt drawdown planned post completion of expansion and increase in equity base, leverage indicators are expected to improve. The assigned ratings are subject to maintaining projected financial indicators within benchmarks for the assigned ratings.

In March’2018, AML’s wholly owned subsidiary commenced operations. Projected annual dividend income will provide support to the company’s profitability and diversify revenue streams. Going forward, the company plans to diversify in the renewable energy segment. In this regard, the group has signed LOI for investment in Solar and Hydel power project.

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

________________________________________________________________________________________________________________________________
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