PACRA Maintains Entity Ratings of Qadir Agro Industries (Pvt.) Limited

Pakistan's edible oil industry is heavily reliant on imports since oil seed than the Edi substantially forfor~80% the of the cost of production. Edible oil is one of the highest imported commodities in Pakistan. Assuming 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 Jun23, 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 2.9mln 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 look of the industry is developing due to price volatility and PKR depreciation.
The ratings indicate the Qadir Agro Industries (Pvt.) Limited’s (‘the Company’) evolving presence in both the edible oil and poultry feed sectors within the country. The Company's financial performance has remained varied over the years owing to the relatively small market share. Lately the Company has enhanced its poultry feed capacity from 15MT to 30MT per hour. The Company’s net sales increased and stood at PKR 5.6bln during FY23 (FY22: PKR 4.1bln) due to increase in prices. Whereas, net income stood at PKR 6mln during FY23 (FY22: PKR 24mln). Whereas margins remain on the lower side as gross profit margin stood at 4.1% during FY23 (FY22: 4.6%). Following this, net profit margin also decreased and stood at 0.1% during FY23 (FY22: 0.6%). Average inventory days showed improvement and stood at 62 days during FY23 (FY22: 79 days). Following this trend, net working capital days also increased and stood at 70 days during FY23 (FY22: 97 days). Interest coverage ratio decreased (FY23: 2.2 x, FY22: 2.5x) on the back of increased finance cost (FY23: PKR 73mln, FY22: PKR 52mln). The financial risk profile of the Company remains on the strong side. The Company’s debt comprises of short term borrowings that stood at PKR 758mln during FY23 (FY22: PKR 1,328mln). Being an importer of oilseeds Company remains exposed to currency risk.
The ratings are dependent on the management's ability to prudently improve margins, profitability, and financial profile of the Company. Meanwhile, strengthening governance practices will have a positive impact on the ratings. Any deterioration in debt coverages leading to higher financial risk or substantial losses will adversely impact ratings.

About the Entity
Qadir Agro Industries (Pvt.) Limited (‘the Company’) was incorporated in July, 1987 as a Private Limited Company. The Company is primarily engaged in the process of seed filtering, crushing and solvent extraction. The Company primarily sells soybean oil/meal, canola oil/meal and poultry feed. The Company has seed crushing capacity of 250MT per day. The capacity of the poultry feed mill, currently, stands at 30MT per hour. The Company’s major ownership resides with Khawaja Mehr Baksh (~34%) and his sons, Khawaja Muhammad Shehzad (~33%) and Khawaja Muhammad Omer (~33%). Mr. Mehr Baksh is the Chairman of the Board, while Mr. Shehzad serves as the CEO of the Company.