Press Release

VIS Reaffirms Entity Ratings of Artistic Denim Mills Limited

Karachi, August 26, 2019: VIS Credit Rating Company Limited (VIS) has reaffirmed entity ratings of ‘A-/A-1’ (Single A Minus/A-One) to Artistic Denim Mills Limited (ADML). Outlook on the assigned ratings is ‘Stable’.

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. Business risk profile is supported by stable demand for denim fabric and garments across various geographical markets. The pricing power is vested with the top-notch retailers who demand competitive pricing, innovation and quality. The rising share of exports from these countries will keep margins under pressure for the domestic industry. However, we expect the denim industry to be positively impacted by the recently undertaken PKR devaluation, despite higher inflation forecasts over the short to medium term horizon.

Assessment of financial risk profile incorporates the company’s strong capitalization as reflected by moderately leveraged capital structure and sound liquidity indicators as evident from healthy cash flows in relation to outstanding obligations. The gross margins have remained stable and overall profitability has depicted improvement in the ongoing year. In view of additional borrowings undertaken for expansion and concurrent running finance requirements, the gearing and leverage have trended upwards. However, they are expected to remain within our threshold for the assigned rating. Ratings are dependent upon realization of planned business targets from expansion project, within the leverage and gearing indicators as outlined above.

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

Mr. Javed Callea

Applicable Rating Criteria: Industrial Corporates (May 2016)

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 not an NRSRO and its credit ratings are not NRSRO credit ratings.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 2019 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .

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