Ahmed Oriental Textile Mills’ Ratings Affirmed Amid Economic Challenges

Karachi: VIS Credit Rating Company Limited has maintained the entity ratings of Ahmed Oriental Textile Mills Limited at ‘A-/A2’, indicating good credit quality with adequate protection factors. The outlook on these ratings has been revised to “Stable” from “Negative”, reflecting stability in the company’s financial risk profile despite economic challenges.

Ahmed Oriental Textile Mills Limited, incorporated in 1989, operates primarily in the manufacture and sale of yarn for both local and export markets. The company, headquartered in Karachi, has its mills located in Rahim Yar Khan. Despite being delisted from the Karachi and Lahore stock exchanges in the early 2000s, the company remains a significant player in Pakistan’s textile spinning sector.

The ratings take into account the inherent risks in the textile spinning sector, which include demand variability, regulatory challenges, energy sensitivity, and competitive pressures. These factors are compounded by limited domestic cotton production and shifts in global procurement patterns, which have impacted export volumes. Nevertheless, the company’s focus on coarse yarn has mitigated adverse effects on sales.

The economic environment has posed additional challenges, with changes in tax regimes and the withdrawal of the Export Facilitation Scheme affecting cost competitiveness. High energy tariffs and wages have further pressured operating costs, impacting margins. However, the company’s association with the Naveena Group provides operational support and flexibility, despite no direct financial backing.

The change in outlook to “Stable” reflects the company’s ability to maintain a stable financial risk profile, supported by increased revenue from both direct and indirect exports, as well as local sales. Despite elevated capitalization indicators and reliance on short-term borrowing, regular debt repayments and retained earnings have supported the capital structure.

Looking ahead, Ahmed Oriental Textile Mills’ ratings will be contingent upon sustaining operational performance in light of market and regulatory conditions. Improvements in liquidity, coverage, and capitalization metrics will be key to maintaining the current ratings. The company’s established market presence and operational scale, supported by the Naveena Group, continue to underpin its ratings.