Press Release

JCR-VIS Revises Entity Ratings of MIMA Leather (Pvt.) Ltd.

Karachi, November 28, 2018: JCR-VIS Credit Rating Company Limited has revised the entity ratings of MIMA Leather (Pvt.) Limited (MLPL) to ‘BB+/A-3’ (Double B Plus/A-Three) from ‘BBB-/A-3’ (Triple B Minus/A-Three). Outlook on the assigned ratings continues to be ‘Negative’. Previous rating action was announced on October 9, 2017.

The revision in ratings reflects weakening in the company’s financial profile and subdued demand for MLPL’s products. The global trade of leather products is subject to cyclical demand patterns while the gross margins in the business have also seen notable volatility. Leather industry in Pakistan remains largely export-oriented. Given fall in trade volumes of leather products globally, financial profile of MLPL has weakened on a timeline basis.

Majority of sales comprise exports to the European region. After MLPL’s sales witnessed a decline of 28% on account of volumes in FY17, topline increased by 8.5% in FY18 on the back of better pricing. Europe continues to remain an important market for MLPL; expansions in the untapped countries are planned, going forward. Gross margins were reported lower on account of depressed volumetric sales vis-à-vis historical sales. Going forward, profitability is expected to remain under pressure due to subdued demand of leather products. Hence, achieving projected sales volumes is considered important in terms of profitability.

Liquidity profile of the company has weakened on a timeline basis with negative cash flows & an increase in cash conversion cycle. Consistent losses have resulted in equity attrition on timeline basis. At these capitalization levels, leverage indicators remain on the higher side. In order to keep the equity base sustainable, equity injection is considered necessary. This will improve the risk profile of the institution and will facilitate in improving liquidity profile and reducing leverage indicators.

The ratings of MLPL derive strength from track record of sponsors having business cycle experience in leather industry. Shareholding is vested with family members who are represented on the company’s Board of Directors while also holding key management positions.

For further information on this rating announcement, please contact the undersigned (Ext: 201) at 35311861-70 (10 lines) or fax to 35311873.

Javed Callea

Applicable Rating Criteria: Industrial Corporates (May 2016)

Information herein was obtained from sources believed to be accurate and reliable; however, VIS Credit Rating Company Limited 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.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.VIS is not an NRSRO and its credit ratings are not NRSRO credit ratings.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 VIS Credit Rating Company Limited. All rights reserved. Contents may be used by news media with credit to VIS.

JCR-VIS Credit Rating Company Limited