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JCR-VIS reaffirms entity ratings of Hub Leather (Pvt.) Limited

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by April 15, 2013 General

Karachi, April 15, 2013 (PPI-OT): 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’.

With leather being a relatively luxury product, leather industry is cyclical with sales exhibiting volatility in line with the global economic cycle.

Over the last 5 years, Pakistan’s leather exports have hovered around $1b. In FY12, there was slight decline in exports due to continuing recession in Europe; however, rupee depreciation benefited export based units.

The sales of HLPL declined during FY12 owing to decline in sales volumes. However, gross margins of the company improved on account of utilization of beginning raw material stock carried at lower cost; other manufacturing costs were also kept under control during the period.

The company reported a net loss owing to loss on sale of an associated concern. Excluding this one-time loss, HLPL generated higher net profit margin.

Sale proceeds from the disposal of investment in associated concern allowed HLPL to invest in other profitable group companies.

Borrowings and leverage were reduced on the back of an improved cash conversion cycle; however, the company may require borrowings for working capital requirement, going forward, the quantum of which would depend on raw material prices and production levels.

HLPL is part of the Mima group of companies which also comprises two other companies operating in the leather sector engaged in tanning operations. Combined sales of the three entities remained at Rs. 2.5b in FY12.

For further information on this rating announcement, please contact Mr. Jamal Abbas Zaidi (Ext: 408) or Ms. Sobia Maqbool, CFA (Ext: 604) at 021-35311861 or fax to 021-35311873.

For more information, contact:
Mr. Javed Callea
JCR-VIS Credit Rating Company Limited
Tel: +9221 35311861 (10 lines) (Ext: 501)
Fax: +9221 35311872-3
E mail:


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