Press Release

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

Karachi, May 04, 2015: JCR-VIS Credit Rating Company Limited has reaffirmed the entity ratings of MIMA Leather (Pvt.) Limited (MLPL) at ‘BBB/A-3’ (Triple B/A-Three). Outlook on the medium to long term rating is ‘Stable’. Previous rating action was announced on April 9th 2014.

Leather industry in Pakistan is an export-oriented industry contributing ~5.4% of the total export earnings and ~5% of the GDP. During FY14, leather exports grew by 11% in comparison to the preceding year. However, the industry is presently facing a number of challenges including slowdown in the Eurozone, which is a major export destination for Pakistan’s leather industry. In addition to this, steep decline in Euro/PKR parity subsequent to year-end 2014 has impacted margins of industry players. Resultantly, there has been an industry-wide consolidation with smaller players exiting the market which will allow more established players to benefit, going forward.

The rating of MLPL derives strength from track record of sponsors who have extensive experience in the leather industry. The company is engaged in the process of leather tanning and deals primarily in goat skin leather. MLPL’s turnover has experienced decline in the outgoing year on account of changing demand patterns and slowdown in the Eurozone. The management has increased sales to clients in the local market while sales to Far East destinations and China have also showcased an uptick on a timeline basis.

Margins have witnessed pressure in 1HFY15 due to Euro depreciation; however, management expects pressure on margins to be mitigated in view of recent dip in the cost of hides. Given the lower turnover, the company’s inventory levels have risen and accordingly cash conversion cycle has lengthened. Resultantly, debt levels have increased and leverage indicators have trended upwards. However, borrowings are entirely short term in nature and matched by stock-in-trade.

For further information on this rating announcement, please contact the undersigned (Ext: 501) at 35311861-70 (10 lines) or fax to 35311873.

Javed Callea

Applicable Rating Criteria: Industrial Corporates (October 2003)

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 2015 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