Karachi: VIS Credit Rating Company Limited has reaffirmed the entity ratings of Artistic Denim Mills Limited (ADML) at 'A-/A2', reflecting a stable outlook despite ongoing economic challenges. The medium to long-term rating of 'A-' signifies good credit quality with adequate protection factors, while the short-term rating of 'A2' indicates a strong likelihood of timely repayment of short-term obligations.

ADML, a vertically integrated denim fabric and garment manufacturer, was established in 1992 and is publicly listed on the Pakistan Stock Exchange. The company operates out of its registered office and factory in the Korangi Industrial Area of Karachi, focusing on the manufacture and export of garments, denim fabric, recycled fiber, yarn, and other textile products.

The reaffirmed ratings come amid the medium business risk profile of the textile sector, which is subject to economic cyclicality and intense competition. As a sector heavily reliant on exports, its performance is closely linked to both domestic and global economic conditions, making it susceptible to demand fluctuations.

Supporting the ratings is ADML's robust financial risk profile, bolstered by a strong equity base and sponsorship. Despite weakened profitability margins due to high energy costs and elevated interest rates, the company's liquidity and coverage metrics have remained stable. ADML is currently expanding its solar power capacity, a move expected to enhance profitability as interest rates decrease.

This reaffirmation follows VIS's previous rating action announced on March 29, 2024, and underscores ADML's resilience in navigating economic challenges while maintaining financial stability.