Press Release

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

Karachi, June 03, 2016: 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 assigned ratings is ‘Stable’. Previous rating action was announced on May 4th 2015.

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 is largely export-oriented with third largest contribution to the country’s total exports. With slowdown in Eurozone & China and significant depreciation of Euro against PKR, leather exports have witnessed a significant decline. Given the current sector dynamics, financial profile of MLPL has weakened on a timeline basis.

Export sales which comprise a bulk of revenues suffered a setback in terms of volume and value in FY15 while an uptick in local demand was noted which provides a smaller contribution to the revenues. The margin thus narrowed which along with financial and other chargers led to a loss in FY15. Going forward, management expects improvement in margins due to decline in raw material prices. Achieving projected sales volumes is considered important for the same. While leverage indicators have trended upwards, borrowings are entirely short term in nature and matched by sizeable stock-in-trade which is being reduced.

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. Ratings also reflect support from sponsors in the form of planned equity injection of Rs. 100m in the ongoing year.

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)

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JCR-VIS Credit Rating Company Limited