Press Release

VIS Maintains Entity Ratings of Amna Industries (Pvt.) Limited

Karachi, May 17, 2024: VIS Credit Rating Company Limited has maintained the entity ratings of Amna Industries (Pvt.) Limited (AIL) to 'BBB+/A-2' (Triple B Plus/A-Two). Outlook on the assigned ratings has been revised from ‘Stable’ to ‘Negative’. The medium to long term rating of ‘BBB+’ signifies adequate credit quality, protection factors are reasonable and sufficient. Risk factors are considered variable if changes occur in the economy. Short term ratings of ‘A-2’ denotes good certainty of timely payment. Liquidity factors and company fundamentals are sound. Risk factors are small. Previous rating action was announced on March 1, 2023.

AIL is principally engaged in manufacturing and sale of yarn, having a spinning capacity of 37,716 spindles. It specializes in production of knitted yarn ranging from 9 singles up to very fine yarn of 80 singles. In addition, the Company has also installed “Fabric Dyeing Unit” and a knitting department, with plans to grow export sales through garment segment.

The assigned ratings reflect the medium business risk profile inherent in Pakistan's textile sector, characterized by exposure to economic cyclicality and strong competition. Performance within this sector is heavily influenced by broader economic conditions, making it susceptible to demand fluctuations driven by both domestic and international economic factors, particularly its reliance on exports. Additionally, supply-side risks such as local cotton crop production and dependence on imported raw materials expose the sector to considerable exchange rate risk.

Given rating takes into account the business updates of the Company wherein topline remained muted in FY23, while inventory losses resulted in diminished gross margin. This was further attributed by increased operating expenses and finance cost which resulted in negative bottom line. In 1H’FY24 despite a substantial increase in net sales vis-à-vis SPLY, driven by higher selling prices, resulted in some improvement in gross margins. However, rising operating expenses and finance cost kept net margins lower than below FY22 levels.

The revision in rating outlook takes into account the Company’s financial risk profile which exhibited stressed cashflow and profitability during the review period. Current ratio hovered around 1.0x during the review period and debt service coverage remained stressed during the rating horizon in view of the elevated debt leveraging. Going forward, improvement in net profitability, along with debt coverages and capitalization indicators is important from ratings perspective.

For further information on this ratings announcement, please contact at 021-35311861-64 or email at info@vis.com.pk.

Applicable Rating Criteria: 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 2024 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .