Press Release

VIS Maintains Entity Ratings of Ahmed Oriental Textile Mills Limited

Karachi, April 15, 2025: VIS Credit Rating Company Limited (VIS) maintains entity ratings of Ahmed Oriental Textile Mills Limited (“AOTML” or “the Company”) at 'A-/A2' (“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 'A2' indicates a good likelihood of timely repayment of short-term obligations with sound short-term liquidity factors. The outlook on the assigned ratings has been revised to “Stable” from “Negative”. Previous Rating action was announced on January 15, 2024.

AOTML 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 incorporate the business risk profile of Pakistan’s textile spinning sector, which remains influenced by demand cyclicality, competitive pressures, regulatory challenges, and energy sensitivity. The sector serves as a critical upstream segment in the textile value chain, with performance closely linked to broader economic conditions. Cotton production remained below domestic demand requirements despite a marginal improvement in cultivation area, as shifting preferences among farmers toward higher-margin crops limited recovery. Export volumes saw limited growth, with changes in global procurement patterns and political uncertainty contributing to the diversion of export orders to regional competitors. However, the impact on the Company’s sales remained contained due to product focus on coarse yarn, which continued to find demand. The withdrawal of the Export Facilitation Scheme and transition from the Final Tax Regime to the Normal Tax Regime have reduced cost competitiveness of locally produced yarn. Regional competition continues to pose structural challenges, with limited product diversification constraining market capture. Energy tariffs and regulatory changes have added to operating cost pressures, while high energy costs and rising wages have further compressed margins. Ratings also consider the Company’s association with the Naveena Group, which provides operational flexibility and group-level support, despite the absence of explicit financial backing.

Change in outlook considers stability of the financial risk profile of the Company, despite a challenging economic and operational environment. Revenue growth has been supported by increased volumes across direct exports, indirect exports, and local sales. Indirect exports remain the largest revenue contributor. Gross margins remained stable, aided by the use of lower-cost raw materials suited to coarse yarn production. Capitalization indicators remained elevated, with marginal improvement observed in the ongoing period. While regular debt repayments and retained earnings supported capital structure, increased reliance on short-term borrowing offset any significant improvement in gearing and leverage levels. Liquidity has remained constrained, with a decline in the current ratio and continued reliance on short-term borrowings. Coverage indicators remained under pressure due to elevated interest costs, though a reduction in benchmark rates is expected to ease financing pressure going forward.

Going forward, ratings will remain sensitive to the sustainability of operational performance under prevailing market and regulatory conditions. Key sensitivities include ability to improve liquidity, coverage and capitalization metrics to commensurate with the assigned ratings. The ratings will continue to be supported by the operational scale and established market presence of the Naveena Group.

For further information on this rating announcement, please contact at 021-35311861-64 or email at


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

Information herein was obtained from sources believed to be accurate and reliable; however, VIS Credit Rating Company Limited (VIS) does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information.VIS , the analysts involved in the rating process and members of its rating committee do not have any conflict of interest relating to the rating(s)/ranking(s) mentioned in this report.VIS is paid a fee for most rating assignments. This rating/ranking is an opinion and is not a recommendation to buy or sell any securities. Copyright 2025 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .