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Karachi: JCR-VIS Credit Rating Company Ltd. (JCR-VIS) has reaffirmed the medium to long-term entity rating of Hub Leather (Pvt.) Ltd. (HLPL) at ‘BBB’ (Triple B) and short-term rating at ‘A-3’ (A-Three). Outlook on the medium to long term rating is ‘Stable’.
HLPL is part of the MIMA group of companies and specializes in the production of leather garments and accessories. Apart from HLPL, two other group companies operate in the leather sector; these are engaged in tanning operations from goat, cow and buff hides. Combined sales of the three entities were over Rs. 2.5b in FY11.
Net sales of HLPL have depicted steady growth since FY08. Concentration in sales is high and the management has increased focus on marketing efforts to achieve geographic and customer diversification.
Gross margins have showcased improvement on account of rupee depreciation (against Euro) which has also mitigated the impact of rising prices of finished and unfinished leather. With continued rise in raw material prices, future margins will depend on the company’s ability to pass on the increase to customers and rupee parity against international currencies in which sale proceeds are realized.
A significant portion of the company’s equity had been deployed in an associated concern, sale deal of which has been recently finalized. This is likely to improve cash flows. Given its low leveraged capital structure, the company is likely to be able to maintain its risk profile.
For more information, contact:
Mr. Javed Callea
Advisor
JCR-VIS Credit Rating Company Limited
Tel: +9221 35311861 (10 lines) (Ext: 501)
Fax: +9221 35311872-3
E mail: javed.callea@jcrvis.com.pk