Lahore, November 01, 2018 (PPI-OT): Among the largest agro based segments in Pakistan, poultry holds a prominent place. In Pakistan, formal feed manufacturing started in early 1960. With 350 poultry feed mills and home mixtures, country annually produces around 10 MMT of poultry feed. This industry directly derives its demand from poultry – chicken and eggs consumption. With growing income levels and expanding population, the demand for poultry has substantial growth prospects. The industry is experiencing ~ 10% growth.
The ratings reflects Shabbir Feed Mills strong presence in Southern Punjab in its related fields – poultry feeds, broiler meat and table eggs. During FY18, the Company’s topline witnessed a decline underpinned by volatile demand in the poultry industry. However, procuring raw materials – maize, at low cost benefited the margins. The Company’s long working capital cycle is due to seasonal nature of inputs that leads to longer holding period. The Company operates with high leveraging, primarily in the form of short-term borrowings, to fund the inventory and advances/financial support to other group companies. This led to a stressed financial profile due to increased borrowings that stressed the coverages.
The ratings are dependent on the management’s ability to build profitable volumes while maintaining its margins. Financial discipline is crucial. Improvement in the debt mix and better coverages will benefit the ratings. Meanwhile, strengthening of governance framework would be positive for the ratings.
For more information, contact:
The Pakistan Credit Rating Agency Limited (PACRA)
Awami Complex, FB1, Usman Block New Garden Town,
Lahore – Pakistan
Tel: +9242 586 9504 -6
Fax: +9242 583 0425
Category: General Business News