Karachi, December 31, 2021 (PPI-OT):VIS Credit Rating Company Limited (VIS) has upgraded the entity ratings of Ahmed Oriental Textile Mills Limited (AOTML) to ‘A-/A-2’ (Single A Minus/A-Two) from ‘BBB+/A-2’ (Triple B Plus/A-Two). Outlook on the assigned ratings is ‘Stable’. Long Term Rating of ‘A-’ reflects good credit quality with adequate protection factors. Risk factors may vary with possible changes in the economy. Short Term Rating of A-2 indicates good certainty of timely payment. Liquidity factors and company fundamentals are sound. Access to capital markets is good. Risk factors are small. The previous rating action was announced on November 20, 2020.
Ahmed Oriental Textile Mills Limited (AOTML) is engaged in manufacturing and sales of yarn. The Company is a part of Naveena Group, which also owns Naveena Industries Limited. The Company has two spinning mills, which are located in Rahim Yar Khan (RYK). Although the Company also caters directly to the export markets, majority of the Company’s sales constitute local and indirect export sales to weavers who manufacture products and exports in the international market.
An upward revision in ratings reflects partial completion of the planned expansion along with improvement in financial risk profile. Topline of the Company has witnessed a double-digit growth in FY21 due to an uptick in both sales volume and higher average selling prices on account of currency devaluation. Going forward, sales are expected to escalate on account of adequate orders in pipeline along with further planned expansion in the spinning segment. Similarly, overall profitability profile of the company in FY21 improved on account of higher gross margins led largely by inventory gains.
However, increasing interest rates on short-term running finances are expected to be a drag on the profitability of the Company in the medium term. Despite debt drawdown, cash flow coverage of outstanding obligations improved in FY21 on account of higher profitability. Maintenance of liquidity coverages is considered important from ratings perspective. Moreover, capitalization indicators are elevated to finance working capital requirements and expansion in the spinning segment in FY21, however, given no additional funds planned to be drawn for the expansion in the medium-term, leverage indicators are expected improve over the rating horizon. Ratings remain dependent on achievement of projected financial indicators going forward.
For more information, contact:
Director Compliance and Rating Analytics,
VIS Credit Rating Company Limited
VIS House, 128/C, 25th Lane off Khayaban-e-Ittehad,
Phase VII, DHA, Karachi, Pakistan
Tel: +92-21-35311861-72
Fax: +92-21-35311873
Email: bilal@jcrvis.com.pk
Website: https://www.vis.com.pk/