Press Release

VIS Maintains Entity Ratings of Artistic Denim Mills Limited

Karachi, April 24, 2020: VIS Credit Rating Company Limited (VIS), while maintaining the entity ratings of ‘A-/A1’ (Single A Minus/A-One) assigned to Artistic Denim Mills Limited (ADML), has placed the same on ‘Rating Watch-Developing’ status. Long Term Rating of ‘A-’ reflects good credit quality with adequate protection factors. Risk factors may vary with possible changes in the economy. The short-term rating of ‘A-1’ signifies high certainty of timely payment; liquidity factors are excellent and supported by good fundamental protection factors while risk factors are minor. Previous rating action was announced on August 26, 2019.

ADML operates as a vertically integrated denim fabric and garment manufacturer. The company’s revenues are largely export centered, comprising more than three-fourth of the topline. The ratings incorporate the business risk profile of the denim sector, which is driven by the global demand and pricing dynamics. Assessment of financial risk profile incorporates the company’s strong capitalization as reflected by a moderately leveraged capital structure and sound liquidity indicators, evident from healthy cash flows in relation to outstanding obligations.

The revision in rating outlook reflects prevailing uncertainty in textile sector dynamics due to coronavirus outbreak, prolonged lockdown, overall contraction in demand and challenging economic environment. It is expected that the entire value chain of the textile industry will be affected by these developments. Status of the assigned rating is therefore uncertain as an event of deviation from expected trend has occurred; additional information will be necessary to take any further rating action, warranting a ‘Rating Watch-Developing’ status. Given that the company has low borrowings compared its equity level, it is expected that ratings will remain stable post recovery of the ongoing situation; nevertheless as scenario is evolving rapidly, VIS will closely monitor and will accordingly take action to resolve the outlook status.

For further information on this rating announcement, please contact the undersigned (Ext: 201) at 021-35311861-71 or fax to 021-35311872-3.




Faryal Ahmad Faheem
Deputy CEO

Applicable Rating Criteria: Industrial Corporates (May 2019)
http://vis.com.pk/kc-meth.aspx

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