October 26, 2018 (MLN): JCR-VIS Credit Rating Company Limited (JCR-VIS) has assigned initial entity ratings of ‘BBB+/A-2’ (Triple B Plus/A-Two) to Ahmed Oriental Textile Mills Limited (AOTML). Outlook on the assigned ratings is ‘Stable’.
According to a recent press release by JCR-VIS, the assigned ratings incorporate the single product (yarn only), medium size operations of the company with manageable leverage indicators, adequate margins and sufficient cash flow position in relation to outstanding debt.
The ratings also take into account the business risk of the spinning industry and stable market demand. However, room for improvement in corporate governance framework is available.
AOTML’s recovery in gross margins for FY18 was attributable to higher prices of yarn observed in the industry. In light of the same, financial profile of the company is expected to improve further. However, debt servicing ability of AOTML will remain dependent upon price volatility in the yarn market.
The equity base of AOTML has improved on account of profit retention, which has also led to a slight decline in gearing, although short term borrowing has increased. Repayment of long term loans is expected to reduce leverage indicators as the company, currently, does not have any expansion plans.
Ahmed Oriental Textile Mills Limited was acquired by Naveena Industries Limited (NIL) in 1992 and is dedicated to the spinning segment of Naveena Group.
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