Press Release
VIS Reaffirms Entity Ratings of Artistic Denim Mills Limited
Karachi, June 17, 2026: VIS Credit Rating Company Limited (VIS) reaffirms entity ratings of Artistic Denim Mills Limited (“ADML” or “the Company”) at 'A-/A2' (“A minus”/“A Two”). Medium to long term rating of 'A-' indicates good credit quality; Protection factors are adequate. Risk factors may vary with possible changes in the economy. Short term rating of 'A2' indicates a good likelihood of timely repayment of short-term obligations with sound short-term liquidity factors. Outlook on the assigned rating is “Stable”. Previous Rating action was announced on April 30, 2025.
ADML operates as a vertically integrated denim fabric and garments manufacturer which includes five key sectors: spinning, weaving, garments, fiber dyeing and recycling. The principal activity of the Company is to manufacture and export of garments, rope dyed denim fabric, recycled fiber, yarn and value-added textile products. ADML was incorporated in 1992 as a Public Limited Company (PSX: ADMM). Its registered office and factory premises are located in Korangi Industrial Area, Karachi.
Assigned ratings incorporate the medium business risk profile of Pakistan’s textile sector, characterized by exposure to economic cyclicality, intense competition, and global demand fluctuations. The sector continues to face challenges from elevated energy, salary, financing and freight costs, liquidity constraints arising from delayed sales tax refunds, reliance on imported raw materials, and the absence of significant rupee depreciation. Moreover, margins remain under pressure amid increasing regional competition, the shift toward the normal tax regime, and potential monetary tightening. Nevertheless, the sector may derive support from a gradual recovery in global demand, increasing focus on value-added products, and efforts to diversify customer bases through the acquisition of new clients, particularly in higher-margin and branded apparel segments.
The Company’s topline declined during FY25, primarily driven by lower export garment sales amid reduced offtake from a key US-based customer. Profitability margins came under pressure due to intense pricing competition in international garment and denim markets, particularly from regional players with lower cost structures, alongside elevated energy and salary-related costs. Ratings are underpinned by the Company’s several initiatives to support future performance, including efforts to diversify its customer base through addition of new clients, increased focus on value-added garments, installation of renewable energy capacity to reduce energy cost burden, and establishment of a fiber dyeing facility to create additional revenue streams. Management also expects gradual improvement in performance going forward, supported by addition of new customers, a better product mix with higher value-added garments, and operational efficiencies driven by cost optimization initiatives.
On the financial risk profile front, equity has declined due to accumulated losses, while borrowings have increased with a partial shift in funding mix following re-profiling of debt. Overall, the capitalization structure has weakened and indicators have moved upward. Liquidity and coverage indicators remain under pressure, reflecting stretched working capital cycle and constrained cash flow generation capacity. The ratings are supported by the expected improvement in profitability, strengthening liquidity profile, and prudent management of capitalization. However, failure to achieve the anticipated recovery in operations and financial performance may exert downward pressure on the ratings.
For further information on this rating announcement, please contact at 021-35311861-64 or email at info@vis.com.pk.
Applicable Rating Criteria:
Industrial Corporates
https://docs.vis.com.pk/docs/CorporateMethodology.pdf
VIS Issue/Issuer Rating Scale
https://docs.vis.com.pk/docs/VISRatingScales.pdf