Press Release

JCR-VIS Assigns Entity Ratings of BBB-/A-3 to MIMA Leather (Pvt.) Ltd.

August 26, 2005: JCR-VIS Credit Rating Company Ltd. (JCR-VIS) has assigned initial medium to long-term entity rating of BBB- (Triple B Minus) and short-term rating of A-3 (A Three) to MIMA Leather (Pvt.) Ltd. (MIMA). The outlook on the medium to long-term rating is ‘Stable”.

The ratings account for the sponsors’ long history of successful operations in the leather industry during which they have carved their position as quality, export oriented producers ranking amongst the largest groups in Pakistan in their industry. Over time, the group has ventured in different niches as suppliers to footwear and garments manufacturers as well as producers of other value-added goods including purses / bags etc.

The global trade of leather products is subject to cyclical demand patterns while the gross margins in the business have also seen compression over the past ten years due to the intensifying competition globally from low cost producers. MIMA’s cashflows also follow the industry trends with respect to cyclicality, while the low level of margins has precluded buildup of cash reserves in the company to provide liquidity support during a cyclical downturn. Further, as a business strategy as well as due to seasonal variations in availability of raw material, an aggressive inventory policy is pursued of maintaining substantial inventory of finished and semi finished goods to meet the tight delivery requirements of the customers. This introduces inventory carrying costs to the company and the fact that such inventory cannot be easily liquidated in case of a cyclical downturn affecting product demand, exposes the company to short-term liquidity risk.

However, MIMA benefits from the absence of long-term debt whereby only working capital financing is raised while the strong cashflows position of the group companies provides interim interest free liquidity support reducing the stress on cashflows. Further, as a business strategy MIMA is pursuing geographical and customer diversification in sales to reduce exposure risks and achieve comparative stability in cashflows.

For further information on this rating announcement, please contact Mr. Mohammad Ameen ( / Ext: 235) or Mr. Saad Ahmed Madani ( / ext: 219) at 5671822/5671833/5680996 or fax to 5681105/5671600.

Faheem Ahmad
President & CEO

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 2005 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