Press Release

JCR-VIS Revises Entity Ratings of Universal Leather (Pvt.) Ltd.

Karachi, October 16, 2017: JCR-VIS Credit Rating Company Limited has downgraded the entity ratings of Universal Leather (Pvt.) Limited (ULPL) to ‘BBB/A-3’ (Triple B /A-Three) from ‘BBB+/A-3’ (Triple B Plus/A-Three). Outlook on the medium to long term rating is ‘Negative’. The previous rating action for ULPL was announced on May 20, 2016.

Given the downward trajectory in global leather industry, financial profile of ULPL has weakened on a timeline basis. With a large chunk of cow hide sales emanating through exports, topline of ULPL was a function of both lower volumes and prices. Decline in gross profits translated into narrowed margins and a sizeable loss on the bottom line. As a result, consistent losses have eroded the company’s equity over the past three years. Ratings take into account the weakening of the capitalization indicators emerging from equity replenishment lagging behind losses sustained. The ratings of ULPL are supported by the track record of sponsors having business cycle experience in leather industry.

Management foresees ULPL’s sales to gradually improve in the ongoing year. Nonetheless, profitability is expected to remain under pressure given lower selling prices and subdued demand of leather products. In order to reduce the magnitude of losses, management plans to cater to domestic leather demand; development of local demand would require long term sustainable efforts and will be monitored, going forward. While leverage indicators have trended upwards, borrowings are entirely short term in nature and matched by sizeable stock-in-trade which, given the inventory revaluation risks, is being reduced on a timeline basis.

For further information on this rating announcement, please contact the undersigned (Ext: 201) at 35311861-70 (10 lines) or fax to 35311873.

Javed Callea

Applicable Rating Criteria: Industrial Corporates (October 2003)

Information herein was obtained from sources believed to be accurate and reliable; however, JCR-VIS Credit Rating Company Limited JCR-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.JCR-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.JCR-VIS is not an NRSRO and its credit ratings are not NRSRO credit ratings.JCR-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 2017 JCR-VIS Credit Rating Company Limited. All rights reserved. Contents may be used by news media with credit to JCR-VIS.

JCR-VIS Credit Rating Company Limited