JCR-VIS reaffirms Entity Ratings of MIMA Leather (Private) Limited

Karachi, May 04, 2015 (PPI-OT): JCR-VIS Credit Rating Company Limited has reaffirmed the entity ratings of MIMA Leather (Pvt.) Limited (MLPL) at ‘BBB/A-3’ (Triple B/A-Three). Outlook on the medium to long term rating is ‘Stable’. Previous rating action was announced on April 9th 2014.

Leather industry in Pakistan is an export-oriented industry contributing ~5.4% of the total export earnings and ~5% of the GDP. During FY14, leather exports grew by 11% in comparison to the preceding year. However, the industry is presently facing a number of challenges including slowdown in the Eurozone, which is a major export destination for Pakistan’s leather industry.

In addition to this, steep decline in Euro/PKR parity subsequent to year-end 2014 has impacted margins of industry players. Resultantly, there has been an industry-wide consolidation with smaller players exiting the market which will allow more established players to benefit, going forward.

The rating of MLPL derives strength from track record of sponsors who have extensive experience in the leather industry. The company is engaged in the process of leather tanning and deals primarily in goat skin leather. MLPL’s turnover has experienced decline in the outgoing year on account of changing demand patterns and slowdown in the Eurozone. The management has increased sales to clients in the local market while sales to Far East destinations and China have also showcased an uptick on a timeline basis.

Margins have witnessed pressure in 1HFY15 due to Euro depreciation; however, management expects pressure on margins to be mitigated in view of recent dip in the cost of hides. Given the lower turnover, the company’s inventory levels have risen and accordingly cash conversion cycle has lengthened. Resultantly, debt levels have increased and leverage indicators have trended upwards. However, borrowings are entirely short term in nature and matched by stock-in-trade.

For more information, contact:
Ms. Sobia Maqbool
CFA
JCR-VIS Credit Rating Company Limited
VIS House, 128/C,
25th Lane off Khayaban-e-Ittehad,
Phase VII, DHA, Karachi
Tel: +92-21-35311861-72
Fax: +92-21-35311873
Email: sobia@jcrvis.com.pk

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