Press Release
VIS Maintains Entity Ratings of Ahmed Oriental Textile Mills Limited (AOTML)
Karachi, November 20, 2020: VIS Credit Rating Company Limited (VIS) has maintained the entity ratings of Ahmed Oriental Textile Mills Limited (AOTML) at ‘BBB+/A-2’ (Triple B Plus/A-Two). Outlook on the ratings has been revised from ‘Rating Watch-Negative’ to ‘Stable’. 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 April 24, 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 to the export markets, majority of the company’s sales constitute local and indirect export sales.
The revision in rating outlook reflects maintenance of the financial risk profile in line with the parameters for the assigned ratings. Withstanding the impact of COVID-19, the company managed to largely maintain its net sales during FY20, while growth has been observed in the topline in Q1’FY21 vis-à-vis the corresponding period in the preceding year. Gross margins in FY20 witnessed improvement on account of increase in average selling prices and reduction in raw material costs as a result of decrease in cotton prices. Leverage indicators have increased on account of higher borrowings to fund capital expenditure and increasing working capital requirements. However, overall leverage indicators remain at a manageable level. Even though concerns of a 2nd wave of Covid-19 remain elevated, expectations of the order book for the industry remaining strong in the ongoing year ease the business risk concerns. The assigned ratings remain dependent on maintenance of profitability, liquidity & capitalization metrics in line with the threshold. Given the worldwide continuation of COVID-19 and the company’s reliance on indirect exports, VIS will continue to track financial indicators of the company.
For further information on this rating announcement, please contact Mr. Narendar Shankar Lal (Ext: 203) or the undersigned (Ext: 306) at (021) 35311861-66 or email at info@vis.com.pk.
Faryal Ahmad Faheem
Deputy CEO
Applicable Rating Criteria: Corporates (April 2019)
https://s3-us-west-2.amazonaws.com/backupsqlvis/docs/Corporate-Methodology-201904.pdf