Press Release

VIS Reaffirms Entity Ratings of Ahmed Oriental Textile Mills Limited

Karachi, January 15, 2024: VIS Credit Rating Company Limited (VIS) has reaffirmed the entity ratings of Ahmed Oriental Textile Mills Limited (‘AOTML’ or ‘the Company’) at 'A-/A-2' (‘Single 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 '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. Outlook on the assigned is ‘Negative’. Previous Rating action was announced on December 30, 2022.

Ahmed Oriental Textile Mills Limited was incorporated in November 1989 as a public limited company and was listed on Karachi Stock Exchange (KSE) and Lahore Stock Exchange (LSE). Following the request of the directors, AOTML was delisted from KSE in November 2002 and LSE in April 2003. The principal business of the Company is the manufacture and sale of yarn in local and export market. The registered office of AOTML is located in Karachi and mills at Rahim Yar Khan (RYK).

Assigned ratings for AOTML incorporate a constrained business risk profile attributed to the spinning sector’s susceptibility to economic cyclicality and heightened competition. The spinning sector in Pakistan, comprising of over 400 mills, faces challenges from various economic and environmental factors, including crop damage by flooding and inflation in FY23. Prospects of cotton production in ongoing season are favorable as compared to last cotton season but still below expectations. However, the sector's performance is closely tied to broader economic conditions, rendering it vulnerable to demand fluctuations.

Assigned ratings take into account subdued growth in topline on account of sluggish demand in both export and local markets owing to recessionary trends. Gross and operating margins of the Company were adversely impacted in the wake of elevated raw material costs in FY23, albeit a slight improvement was noted in 1QFY24. Similarly, net margins were constrained by the heightened finance cost emanating from a substantial hike in the policy rate by SBP during the period under review. The Company's capitalization and liquidity indicators remained under stress in FY23 and 1QFY24. The debt service coverage and liquidity available remained short in the review period for the assigned ratings. Hence the negative outlook remains attached to the reaffirmed long and short-term ratings.

Going forward, ratings will remain sensitive to the Company’s ability to recover its profitability, capitalization and coverage metrics while maintaining its liquidity profile commensurate with the assigned ratings."

For further information on this ratings announcement, please contact Mr. Saeb Muhammad Jafri at 021-35311861-64 (Ext. 202) and/or the undersigned at 021-35311861-64 (Ext. 207) or email at

Sara Ahmed

Applicable Rating Criteria: Corporates

VIS Issue/Issuer Rating Scale

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