Press Release

JCR-VIS Reaffirms Entity Ratings of Universal Leather (Pvt.) Limited

Karachi, April 8, 2013: JCR-VIS Credit Rating Company Ltd. (JCR-VIS) has reaffirmed the medium to long-term entity rating of Universal Leather (Pvt.) Ltd. (ULPL) at ‘BBB+’ (Triple B Plus) and short-term rating at ‘A-3’ (A-Three). Outlook on the medium to long term rating is ‘Stable’.

With leather being a relatively luxury product, leather industry is cyclical with sales exhibiting volatility in line with the global economic cycle. Over the last 5 years, Pakistan’s leather exports have hovered around $1b. In FY12, there was slight decline in exports due to continuing recession in Europe; however, rupee depreciation benefited export based units.

ULPL is an export oriented company with sales largely comprising tanned leather sourced from cow hides which is primarily used in manufacturing men’s shoes. Sales of the company declined in FY12 owing to lower sales volumes. The company incurred a net loss mainly due to loss on disposal of an associated concern; even excluding this one-time loss, ULPL incurred an operational loss due to decrease in margins. However, in the ongoing year the company has been able to post profitable results on the back of improved margins.

Despite erosion of equity due to loss incurred during FY12, the company benefited from liquidity thus generated which was utilized largely to fund the company’s own working capital requirements and partially reinvested in other profitable group concerns. Working capital requirement increased due to higher inventory levels. As the management anticipates growth in sales going forward, level of finished goods inventory has increased.

ULPL is part of the Mima group of companies which also comprises two other companies operating in the leather sector; these are engaged in tanning operations & production of leather garments & accessories. Combined sales of the three entities remained at Rs. 2.5b in FY12.

For further information on this rating announcement, please contact Mr. Javed Callea (Ext: 501) or Ms. Sobia Maqbool, CFA (Ext: 604) at 021-35311861 or fax to 021-35311873.


Abdur Rahim, ACII
Advisor

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