PACRA Maintains Entity Ratings of Jadeed Oil Extraction (Private) Limited.

Pakistan's edible oil industry is heavily reliant on imports since oilseeds and edible oil account for ~80% of the cost of production. Edible oil is one of the highest imported commodities in Pakistan. The Genetically Engineered (GE) import ban is removed by third quarter FY23, total oilseed imports are forecasted to reach 2.6 million tons in FY24, which would be 71% higher than the estimated use for FY23. The price of Soybean oilseed stood at 1200 USD/MT in Jun-23, whereas the price of Palm Oil stood at 800 USD/MT in Jun-23, forecasted to ease further. Due to the rise in input costs, especially raw material cost, many companies have experienced a reduction in their profit margins and faced working capital shortages. Total oilseed production in FY24 is projected to increase to 2.95mln Tons. Higher selling prices have increased revenues substantially for the refineries; despite the rise in input costs could not be fully covered and gross profit margins have also been reduced Future outlook of the industry is developing due to price volatility and PKR depreciation.
The rating reflects Jadeed Oil's affiliation with Jadeed Group, a prominent and integrated entity in the poultry supply chain. With a substantial presence throughout the poultry supply chain, the Group engages in importing and breeding grandparent poultry stock, notably Ross-308. Jadeed Oil plays a pivotal role in supporting the Group's vertical integration strategy. The Company's business line includes two main products: meal and semi refined edible oil. Lately, Jadeed oil has installed the multi-seed plant designed for crushing local seed like Canola and rape seed. The Company's topline increased but showed a modest growth.(FY23: PKR 18bln, FY22: PKR 17bln). The topline remains dominated by soybean and canola meal (~72%) only to its Group Company- Jadeed Feeds. While semi-refined edible oil is sold in bulk. Being an importer of soybean oilseed, the Company remains exposed to the inherent risk related to currency fluctuations and raw material cost. This along with increased prices and the shrink business margins. The net income showed a reduction, PKR 66mln from PKR 574mln due to the GMO case concerning Soybean which resulted in increased costs, regulatory hurdles, and market uncertainties, affecting production efficiency and overall profitability. As a result, the company faced challenges in maintaining its previous levels of profitability. The Company's financial risk profile is stretched due to high interest rates exerting the coverage ratios. Working capital requirement are expected to further elevate to support the cycle, however, Group's integrated presence in the poultry sector provides comfort to the ratings.
Sustaining a positive outlook relies on upcoming quarters showcasing strong financial growth and maximizing synergies within the group. The management's ability to prudently manage the liquidity and debt profile of the Company while improving sales remain crucial. Any significant and/or prolonged deterioration in revenues and/or coverages will adversely impact the ratings.

About the Entity
Jadeed Oil Extraction (Pvt.) Limited, was incorporated in Nov-17. Jadeed oil is primarily engaged in the process of seed crushing and solvent extraction by mechanical and chemical processes, along with refining edible oil. At present, Jadeed Oil has a crushing capacity of 180,000 MT per annum. The Company is owned by the family of late Mr. Mian Muhammad Javaid. Jadeed Oil is majorly owned by Jadeed Feeds (~48%) and Mr. Javaid's two sons, Mr. Shoaib Javaid and Mr. Safwan Javaid (~20% each).The remaining stake resides among Mr. Javaid's daughters, Ms. Maimoona Javaid and Ms. Fariha Javaid (~4% each) and his wife, Mrs. Shazia Javaid (~3%). The BoD is dominated by the sponsoring family. Board’s Chairman and the Company's CEO.