Press Release
VIS Maintains Entity Ratings of Universal Leather (Pvt.) Limited
Karachi, February 29, 2024: VIS Credit Rating Company Limited (VIS) maintains entity ratings of Universal Leather (Pvt.) Limited (ULPL) at 'BBB/A-3' (‘Triple BBB/A-Three’). Medium to long term rating of 'BBB' indicates 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-3' indicates satisfactory liquidity and other protection factors qualify entities / issues as to investment grade. Risk factors are larger and subject to more variation. Nevertheless, timely payment is expected. Outlook on the assigned ratings has been changed to ‘Positive’ from ‘Stable’. Previous rating action was announced on January 30, 2023.
Universal Leather (Pvt.) Limited (ULPL) was incorporated in Pakistan in 1968 as a public listed company and was later converted to a private entity in 2004. The Company specializes in tanning leather from cow and buffalo hides. Its manufacturing facilities are located at Karachi and Lahore, with a registered office in Korangi Industrial Area, Karachi. The Company is a family-owned business with extensive experience in the leather industry, including knitwear, apparels, and leather product retail stores. The Company also holds investments in associated companies, MIMA Leather and MIMA Knit, contributing significantly to its asset base.
Assigned ratings incorporate the medium business risk profile attributed to the leather sector, characterized by its export-oriented nature, which shields it from currency depreciation. Moreover, with high reliance on locally sourced raw materials, exchange rate risk is further mitigated. However, the sector remains vulnerable to cyclicality in international markets.
Change in outlook is underpinned by improvement in the profitability profile driven by higher topline growth and the net benefit of currency depreciation on margins. Moreover, the coverage profile is strengthened by increased operational profitability and cash flows. The capitalization metrics have improved due to lower short-term debt drawdown, contributing to better gearing and leverage ratios. However, the liquidity position continues to remain adequate and commensurates with the assigned ratings.
Going forward, ratings will remain sensitive to continued improvement in the Company’s profitability, capitalization, coverage and liquidity metrics.
For further information on this ratings announcement, please contact Mr. Saeb Muhammad Jafri (Ext: 202) or the undersigned (Ext: 207) at 021-35311861-64 or email at info@vis.com.pk.
Sara Ahmed
Director
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