Press Release

VIS Maintains Entity Rating of Ahmed Oriental Textile Mills Limited (AOTML)

Karachi, December 30, 2022: VIS Credit Rating Company Limited (VIS) has maintained the entity rating of Ahmed Oriental Textile Mills Limited (AOTML) at ‘A-/A-2’ (Single A Minus/A-Two)). Outlook on the assigned rating has been revised from ‘Stable’ to ‘Negative’. Long Term Rating of ‘A-’ reflects good credit quality with adequate protection factors. Risk factors may vary with possible changes in the economy. Short Term Rating of 'A-2' indicates good certainty of timely payment. Liquidity factors and company fundamentals are sound. Access to capital markets is good. Risk factors are small. The previous rating action was announced on December 31, 2021.

Ahmed Oriental Textile Mills Limited (AOTML) is engaged in manufacturing and sales of yarn. The Company is a part of Naveena Group, which also owns Naveena Industries Limited. The Company has two spinning mills, which are located in Rahim Yar Khan (RYK). Although the Company also caters directly to the export markets, majority of the Company’s sales constitute local and indirect export sales to weavers who manufacture products and exports in the international market.

Revision in the rating outlook reflects elevated debt levels coupled with pressure on the cash flow coverages. Topline of the Company saw an exponential growth on the back of increase in both sales volume and average selling price along with the currency devaluation. On the other hand, gross margins were adversely impacted due to increase in the prices of the raw materials, primarily cotton. In addition, net margins were also down due to rising interest costs led by higher long-term debt secured in FY22 to fund capex together with higher interest rates. The Company also had to absorb exchange losses against Foreign Currency based borrowings. Liquidity metrics remain adequate. Capitalization indicators are elevated. Going forward, we expect profitability metrics to remain constrained due to rising raw material and interest costs which may keep debt servicing under pressure. Improvement in profit margins will remain a key rating driver.
For further information on this rating announcement, please contact Mr. Shaheryar Khan (Ext: 209) or the undersigned (Ext: 207) at (021) 35311861-66 or email at info@vis.com.pk.




Sara Ahmed
Director

Applicable Rating Criteria: Corporates (August 2021)
https://docs.vis.com.pk/docs/CorporateMethodology202108.pdf

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