PACRA Maintains Entity Ratings of Nizami Feeds (Pvt.) Limited, Outlook "Negative"

The global feed industry can be valued at around ~$460bln, with poultry (~$166bln) constituting ~36% of the total industry. Pakistan has an installed production capacity of ~ 8mln MT of poultry feed annually with a total of ~150 registered feed mills and ~200 unregistered feed mills catering to it. The industry generates an estimated annual revenue of ~ PKR 100bln from local sales to poultry farms. Lately, due to Covid-19 outbreak, marriage halls/restaurants have been closed. This, along with no exports of poultry products, have led to supply glut in local market. Prices of poultry products have posted a dip despite being an essential food item due to lower demand with many poultry farms becoming non-operational. Subsequently, sale of feed and recovery from farms is expected to remain under pressure. Although feed producers have sufficient inventory, lower sales and liquidity crunch are expected to significantly impact industry players. Recent SBP measures will provide some respite in the short-time. However, prolonged lockdown will affect sales in the entire poultry chain.

Nizami Feeds ratings reflect its developing business profile in the poultry feed Industry. The Company entered in feed manufacturing business in 2016 and is primarily engaged in sales of Broiler and Layer Feed in the central region. Previously, the Company had a relatively small top-line with stable margins. The Company remains exposed to inherent risks in the feed industry emanating from raw material price changes and lately low demand due to COVID-19 outbreak. Nizami Feeds piled up raw material inventory, procured on cash, in anticipation of higher prices. This led to stretched the working capital requirement mainly due to high receivable days, met primarily through short-term borrowings. The Company had a moderately leveraged capital structure and stable coverages. The ratings have been put on "Rating Watch" as COVID-19 outbreak and lockdown has adversely impacted industry prospects. The outlook remains negative. PACRA will monitor the prevailing situation and update the ratings accordingly.
The ratings are dependent on the management's ability to sustain its top-line, margins, and profitability. Maintaining strict working capital discipline and ensuing borrowings remains critical. Rationalizing significantly high receivable days is crucial. Any significant deterioration in margins and/or stretched working capital will have negative impact on the ratings.

About the Entity
Nizami Feeds (Pvt.) Limited ventured in the import and trade of soybean meal, medical vaccines and poultry feed in local market in 2006 as a partnership. In 2010, the partnership was registered as a private limited company. Later, in 2016 the Company started manufacturing poultry feed. Currently, the Company deals in both poultry and animal feed, with poultry feed being the primary focus. Six poultry feed variants are produced, with broiler and layer feed as main poultry feed products. Wanda is the sole product under animal feed. The production plant has an installed capacity of 131,400 MT per annum or 50 MT per hour. Nizami Feed's head office is situated in Lahore, while the production plant is in Sheikhupura.

The Company's shareholding vests with the sponsoring family. Mr. Mian Muhammad Ahmad Sethi, Mr. Mian Muhammad Tayyab and Mr. Mian Muhammad Hamza Nizami (brothers) own 47%, 42% and 8% shares of Nizami Feeds, respectively. While, the remaining shareholding resides with the family members of late Mr. Mian Muhammad Abdul Rehman (4%). Board's Chairman and the Company's CEO, Mr. Mian M. Ahmad Sethi, is assisted by a team of experienced professionals.