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Karachi, August 08, 2023 (PPI-OT): VIS Credit Rating Company Limited (VIS), has reaffirmed entity ratings of ‘A-/A-2’ (A-minus /A-Two) assigned to Kausar Ghee Mills (Pvt.) Limited (KGML). The medium to long-term rating of ‘A-’ signifies good credit quality and adequate protection factors. Risk factors may vary with possible changes in economy. The short-term rating of ‘A-2’ denotes good certainty of timely payment. Liquidity factors and company fundamentals are sound. Access to capital markets is good. Risk factors are small. Outlook on the assigned ratings is ‘Stable’. Previous rating action was announced on July 04, 2022.
Kausar Ghee Mills (Pvt.) Limited (KGML), established in 1992 is involved in the manufacturing of Vegetable Ghee, Cooking Oil, and allied products. KGML is a family owned business concern, the Board of Directors comprise eight directors all being members of the sponsoring family. The ratings assigned to KGML take into account its association with Kausar Group of Companies, having business stake in various sectors involving edible oils, poultry, feed and rice processing. Ratings draw strength from integrated production facility, well established distribution network, brand recognition in the local market and vertical integration with group owned feed mill. Ratings also factor in relatively inelastic demand of the staple food segment amidst the economic slowdown in the Country. However, key sector risks including exchange rate volatility, supply chain uncertainties and growing competition continue to prevail.
Financial assessment of the Company reflects growing revenues and equity base, strong liquidity profile, conservative capital structure, and projected improvement in profitability profile through planned efficiency enhancement initiatives and stable demand prospects for edible oil in the domestic market. KGML’s revenue base has depicted healthy year on year growth during the last three years (FY20-FY22) on account of higher average selling prices. Margins have also improved over the past two years on the back of inventory gains and support from investment activities.
KGML’s conservative capital structure as an outcome of minimal reliance on credit financing coupled with sound coverages is a key rating driver. The sponsors have supported the company with interest free loans to meet working capital requirements. Going forward, capitalization profile is expected to remain within manageable levels given no plans of debt drawdown over the rating horizon. Further, amidst challenging market dynamics, maintaining financial risk profile over the rating horizon will remain important for ratings.
For more information, contact:
Director Compliance and Rating Analytics,
VIS Credit Rating Company Limited
VIS House, 128/C, 25th Lane off Khayaban-e-Ittehad,
Phase VII, DHA, Karachi, Pakistan
Tel: +92-21-35311861-72
Fax: +92-21-35311873
Email: bilal@jcrvis.com.pk
Website: https://www.vis.com.pk/
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