VIS reaffirms Artistic Denim Mills long-term rating at A-

June 18, 2026 (MLN): Artistic Denim Mills Limited (PSX:ADMM) has retained its entity ratings of 'A-/A2' from VIS Credit Rating Company Limited, with a Stable outlook maintained on the assigned ratings.

The reaffirmation follows a previous rating action announced on April 30, 2025.

According to VIS, the ratings factor in a medium business risk profile for Pakistan's textile sector, which remains exposed to economic cyclicality, intense competition, and global demand volatility.

The sector continues to grapple with elevated energy, salary, financing, and freight costs, compounded by liquidity constraints from delayed sales tax refunds, dependence on imported raw materials, and the absence of meaningful rupee depreciation.

Margins face additional pressure from rising regional competition, the transition to the normal tax regime, and the possibility of monetary tightening.

Offsetting factors include a gradual recovery in global demand, growing emphasis on value-added products, and customer base diversification into higher-margin and branded apparel segments.

ADMM's topline contracted during FY25, driven primarily by a decline in export garment sales following reduced offtake from a key US-based customer.

Profitability came under strain amid intense pricing competition in international garment and denim markets  particularly from lower-cost regional producers alongside higher energy and salary-related expenses.

The ratings are supported by a range of strategic initiatives the company is pursuing to bolster future performance, including customer base diversification, a sharper focus on value-added garments, installation of renewable energy capacity to ease the energy cost burden, and the establishment of a fiber dyeing facility to generate additional revenue streams.

Management anticipates a gradual improvement in performance, underpinned by new client additions, an improved product mix weighted toward higher value-added garments, and cost optimisation measures.

On the financial risk front, equity has declined due to accumulated losses while borrowings have risen following a partial re-profiling of debt, resulting in a weakened capitalisation structure.

Liquidity and coverage indicators remain under pressure, reflecting a stretched working capital cycle and constrained cash flow generation.

VIS noted that failure to achieve the anticipated operational and financial recovery could exert downward pressure on the ratings.

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