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Lahore, Amid the notable shifts in Pakistan’s poultry sector dynamics, including a rise in poultry prices and challenges from natural calamities, the Pakistan Credit Rating Agency (PACRA) has upheld the entity ratings of Mumtaz Feeds and Allied Industries (Pvt.) Limited.
According to a news release by PACRA, Pakistan’s poultry industry stands as a vital component of the nation’s agro-based segment. The industry, both domestic and commercial poultry, contributes approximately 62.6% to agriculture and about 14.3% to the Gross Domestic Product. With the capacity to generate around 10 million MT of feed annually, the sector witnesses a turnover ranging from PKR 350 billion to PKR 450 billion from local poultry farm sales. The financial year 2023 saw a rise in poultry feed prices, largely attributed to a 53.1% surge in the cost of key raw materials like soybean oilseed and maize. External factors such as the depreciation of the rupee played a role in escalating export expenses for local crushers, leading to a consistent inflationary trend in the cost of oilseed. Moreover, the industry grappled with the aftermath of the FY22 floods, which resulted in significant losses: approximately 31% of livestock/poultry and around 54% of poultry feed.
The release further delves into the performance of Mumtaz Feeds and Allied Industries. Specializing in poultry feed manufacturing and sales, Mumtaz Feeds navigates the inherent challenges posed by the feed industry, especially the fluctuations in raw material prices. A notable point of strength for the company is its synergy in raw material procurement – primarily soybean meal – from a related entity. The company’s finances have seen a marked improvement, evident from a robust leverage structure resulting from a decrease in short-term debt and a bonus share equity injection. Despite facing margin reductions in FY23 due to import restrictions impacting sales costs, the company showcased an encouraging financial trajectory in 1QFY24.
PACRA underscores that the ratings remain contingent on Mumtaz Feeds’ management’s aptitude to expand its market share, enhance margins, and subsequently, profitability. It is imperative for the company to maintain rigorous working capital management and optimal leverage. Any pronounced erosion in profit margins or coverage metrics may adversely affect the ratings.
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