Press Release

VIS Reaffirms Entity Ratings of A.A. Spinning Mills Limited

Karachi, January 15, 2025: VIS Credit Rating Company Limited (‘VIS’) reaffirms the entity ratings of A.A. Spinning Mills Limited (“AASML” or “the Company”) at A-/A2 (Single A minus/ Single 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' suggests good likelihood of timely repayment of short-term obligations with sound short-term liquidity factors. Outlook on the assigned ratings remains Stable. Previous ratings action was announced on December 27, 2023.

AA spinning Mills Limited (AASML or ‘the Company’) was incorporated in 2003 and commenced its commercial operations in 2006. The principal business of the Company is manufacturing and sale of yarn from cotton and/or man-made fiber. The Company has installed 50,544 spindles which have a capacity to produce ~17.6 mln kgs of 20/s count of yarn. The registered office of the Company is in Lahore, Punjab while the manufacturing facilities are located at Faisalabad, Punjab.

Assigned ratings incorporate the business risk profile of the Company, which is influenced by the high to medium risk level of the textile spinning sector in Pakistan. The assigned ratings reflect challenges related to fluctuating raw material availability, energy supply constraints, competitive pressures, and changes in regulatory policies. The Company faces elevated client concentration risk, as evidenced by a notable share of sales being attributed to a limited number of clients. However, this is partially mitigated by established relationships with its major customers.

Assigned ratings also consider the financial risk profile of the Company. Revenue increased as domestic cotton availability improved and import constraints eased, though overall market conditions limited sales growth. Margins were maintained through shifts in the product mix and cost controls, supported by onsite power generation. The capital structure was managed through controlled borrowing and inventory management, while liquidity remained supported by adequate cash flows. Coverage metrics were sustained at comfortable levels in view of improved operational performance and stable margins.

Going forward, the ratings will remain sensitive to the Company’s ability to navigate energy cost pressures and sustain operational efficiencies through planned solar projects. Furthermore, maintenance of liquidity and coverage metrics, alongside an improvement in capitalization ratios commensurate with the assigned ratings, will remain important. Additionally, the management of client concentration risk will be a key factor influencing the ratings.

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








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

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