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VIS Credit Rating Company Maintains Entity Ratings of Universal Leather (Private) Limited

Karachi, October 01, 2020 (PPI-OT): VIS Credit Rating Company Limited has maintained the entity ratings of Universal Leather (Pvt.) Limited (ULPL) at ‘BBB-/A-3’ (Triple B Minus/A-Three). Long Term Rating of ‘BBB-’ reflects adequate credit quality, reasonable and sufficient protection factors. Risk factors are considered variable if changes occur in the economy. Short Term Rating of ‘A-3’ denotes satisfactory liquidity and other protection factors that qualify entities/issues as to investment grade. Risk factors are larger and subject to more variation; however, timely payment is expected. Outlook on the medium to long term rating has been revised from ‘Stable’ to ‘Negative’. The previous rating action for ULPL was announced on May 9, 2019.

The revision in rating outlook reflects prevailing uncertainty in leather sector dynamics due to coronavirus outbreak, lockdown in key markets, overall contraction in global demand and challenging economic environment. Given the trend in sales achieved during ongoing fiscal year, full year sales for FY21 are projected to be stagnant.

Sales revenue largely comprises export sales. Geographic concentration within European market remains high. Client concentration in sales is also high, the same is mitigated by long term association with most large clients. The company is tapping Bangladesh and other Asian markets to reduce geographic concentration. Given the challenging operating environment for leather companies, the maintenance of revenues and profitability would be seen going forward.

Gross margin and profitability improved during FY19; however, in 9MFY20 these declined. The company is focusing on increasing margins along with volumes going forward. Liquidity profile of the company has recovered to satisfactory levels. Leverage indicators remain manageable. Ratings are dependent on achieving growth in revenues, improvement in gross margins while keeping leverage indicators at manageable levels.

For more information, contact:
Director Compliance and Rating Analytics,
VIS Credit Rating Company Limited
VIS House, 128/C, 25th Lane off Khayaban-e-Ittehad,
Phase VII, DHA, Karachi, Pakistan
Tel: +92-21-35311861-72
Fax: +92-21-35311873
Email: bilal@jcrvis.com.pk
Website: https://www.vis.com.pk/