Press Release
VIS Maintains Entity Ratings of Ahmed Oriental Textile Mills Limited (AOTML) with ‘Rating Watch-Negative’ Status
Karachi, April 24, 2020: VIS Credit Rating Company Limited (VIS), while maintaining the entity rating of ‘BBB+/A-2’ (Triple B Plus/A-Two) assigned to Ahmed Oriental Textile Mills Limited (AOTML), has placed the same on ‘Rating Watch - Negative’ status. Long Term Rating of BBB+ reflects adequate credit quality; protection factors are reasonable and sufficient. Risk factors are considered variable if changes occur 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 January 17, 2020.
Ahmed Oriental Textile Mills Limited (AOTML) is engaged in manufacturing and sales of yarn. The company is a part of Naveena Group as majority shareholding of the company is vested with Naveena Industries Limited (NIL). The company has two spinning mills (Unit 1 and Unit 2), both located in Rahim Yar Khan (RYK). Unit 1 is engaged in production of Blended Yarn (polyester cotton) ranging from 8s to 26s count, while Unit 2 is utilized for production of Cotton Yarn (pure cotton) ranging from 7s to 20s count.
The revision in rating outlook reflects prevailing uncertainty in textile sector dynamics due to coronavirus outbreak, prolonged lockdown, overall contraction in demand, sharp fall in cotton prices and challenging economic environment. It is expected that the entire value chain of the textile industry will be impacted by these developments. Status of the assigned rating is therefore uncertain as an event of deviation from expected trend has occurred; additional information will be necessary to take any further rating action. Aforementioned operating dynamics coupled with leveraged capital structure of the company warrant a ‘Rating Watch-Negative’ status. The ratings are dependent upon maintenance of overall sales, profit margins, debt service coverage, and gearing ratios at an adequate level, with outlook subject to be reviewed once the situation stabilizes.
For further information on this rating announcement, please contact Mr. Narendar Shankar Lal (Ext: 203) or the undersigned (Ext. 306) at 021-35311861-70 or email at info@vis.com.pk.
Faryal Ahmad Faheem
Deputy CEO
Applicable Rating Criteria: Industrial Corporates (April 2019)
https://s3-us-west-2.amazonaws.com/backupsqlvis/docs/Corporate-Methodology-201904.pdf