Press Release

VIS Reaffirms Entity Ratings of Artistic Milliners (Private) Limited

Karachi, December 13, 2022: VIS Credit Rating Company Limited (VIS) has reaffirmed entity ratings of ‘AA-/A-1’ (Double A Minus/A-One) to Artistic Milliners (Private) Limited (AML). Long-term rating of ‘AA-’ signifies high credit quality, and strong protection factors. Risk is moderate but may vary slightly from time to time because of economic conditions. Short-term rating of ‘A-1’ denotes high certainty of timely payment, excellent liquidity factors supported by good fundamental protection factors. Risk factors are minor. Outlook on the assigned ratings is ‘Stable’. Previous rating action was announced on December 28, 2021.

AML has grown from a small retail store founded in 1949 to become amongst Pakistan’s leading garment and denim fabric manufacturers and exporters, with vertically integrated operations. Ratings reaffirmation incorporates four-decade operating history, established market positioning as fourth largest exporter in FY22, consistent increase in capacities, sales revenue growth with healthy margins, strong debt coverages, sizeable capital buffers and liquidity. Overall governance framework is adequate with room for improvement in terms of segregating ownership and management.

Since last review, spinning division has added 768 spindles, while number of loom installed increased by 100. The capex was financed through a mix of LTFF and internal capital generation. Major additions in fixed assets pertained to denim segment followed by spinning, processing and garment divisions. As a result, production capacity increased across the board. The entire yarn requirement for denim fabric is met in-house, while half of fabric production is used to make garments. Given the global slowdown in fabric demand, management anticipates slight dip it utilization levels of both segments in the ongoing year.

Net sales nearly doubled over the last two fiscal years, surpassing Rs. 83b mark in FY22, with a 5-year CAGR of 23% for the period (FY18-22). In terms of product mix, garment exports account for two-thirds of revenue, with the remainder coming from fabric sales, which are further classified as direct/indirect exports. More than 60% of fabric and garment exports are directed to Bangladesh and the United States, indicating geographic concentration. Similarly, client concentration also remains high in top five clients. In line with industry trend, uptick in inventory holdings led to increase in cash conversion cycle over time. Business risk profile takes into account industry wide growth in exports over the last year; however, recent floods across the country, rising interest rates, inflationary pressures, and higher electricity costs pose risks on the sector over the medium term. Ratings are constrained by current weak macroeconomic environment globally and locally. Hence, meeting projected growth targets and maintaining financial risk profile will be important for ratings.

For further information on this rating announcement, please contact Mr. Muhammad Tabish (Ext: 206) or the undersigned (Ext. 201) at 021-35311861-70 or email at info@vis.com.pk


Javed Callea
Advisor

Applicable Rating Criteria: Industrial Corporates (August 2021)
https://docs.vis.com.pk/docs/CorporateMethodology202108.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 2022 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .