PACRA Maintains Entity Ratings of Jadeed Feeds Industries (Pvt.) Limited

Pakistan has the capacity to produce ~10mln MT of feed annually. The industry generates an annual turnover of ~PKR 827bln during FY23 from local sales to poultry farms. Currently, an uptick in poultry prices has improved the dynamics of poultry and poultry feed segments. The cost of soybean oilseed and maize has declined during FY23 owing to bumper crop in Brazil. While rupee depreciation made exports expensive for the local crusher; hence, meal cost posted an inflationary trend. Additionally, soybean prices are forecast to fall further in FY24 owing to improved global production levels of soybean seed. Despite increase in the feed and poultry product prices, the industry's margins remain stretched. However, the industry is able to manage its working capital cycle in a stable manner. Going forward, cashflows and liquidity are expected to remain stable. Going forward, the sector’s performance is expected to remain rangebound, owing to the aforementioned factors. Nonetheless, there is a need for the sector players to shift to alternatives for soybean meal such as cotton seed, rapeseed, mustard seed, sunflower seed, and canola seed, which will serve to lower the sector’s vulnerability to international prices & import restrictions.
The ratings reflect Jadeed Feed’s association with Jadeed Group, a leading and integrated player in the poultry supply chain. The Group has a significant presence along the poultry supply chain as it imports and breeds grandparent poultry stock (Ross 308). The Company's current business line comprises three main products: poultry feed variants, poultry breeding stock, and day-old chicks. The Company's topline is dominated by poultry feed sales followed by poultry breeder stock and day old chick sales. Topline remains strong (FY23: PKR 65bln FY22: PKR 53bln) supported by increased prices. However, the Company's margins improved (FY23: ~10.6% FY22: ~9%). Inventory management system and related efficiencies are expected to keep the Company's working capital costs low. The financial risk profile is demonstrated by an adequate cash cycle to fund working capital needs, Coverages and capital structure (~57%) remain adequate. With the demise of the previous sponsor, Mr. Javaid, the succession planning was evident with the ownership being passed onto the next generation. Moreover, ownership structure remains stable with a further succession plan also in place.
The ratings are dependent on the management's ability to prudently manage liquidity and working capital requirements, and also to build profitable volumes and adherence to strong financial discipline remains critical for the ratings. Envisioned improvement in business and financial profile along with effective breeder stock and day-old chick sales, is also a crucial factor. Significant deterioration in coverages and/or margins will have a negative impact on the ratings.

About the Entity
Jadeed Feeds Industries (Pvt.) Limited, was incorporated in Jun-08 as a private limited company as per the Companies Ordinance 1984.Currently, the Company's feed mills have a combined capacity to produce 240 MT/hour. Farms have a placement capacity of 2.6mln and a hatching capacity of 443mln eggs per annum. GP farms have a placement capacity of 0.34mln and a hatching capacity of 47.5mln eggs per annum. The Company is owned by the family of late Mr. Mian Muhammad Javaid. Majorly owned by his two sons, Mr. Shoaib Javaid and Mr. Safwan Javaid (~31% each) The remaining stake resides among Mr. Javaid's daughters, Ms. Maimoona Javaid and Ms. Fariha Javaid (~12% each) and his wife, Mrs. Shazia Javaid (~15%). The Board’s Chairman and the Company's CEO, Mr. Shoaib, play a pivotal role in making strategic decisions.