PACRA Maintains Entity Ratings of Sadiq Feeds (Pvt.) Limited

Pakistan's capacity to produce has improved to ~10 to 13mln MT of feed annually. The industry generates an estimated annual turnover of ~PKR 400bln to PKR 500bln 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 in the international market has witnessed a surge of 23.2%; while, the cost of maize, in the local market, has surged to ~ 10.6% during 8MCY22. The surge in the cost of the raw materials, internationally and locally, relative to the price of poultry feed and poultry products has squeezed the industry's margins. However, the industry remains able to manage its working capital cycle in an efficient manner. Lately, interest rate hikes and recent floods are expected to further impact production. However, cashflows and liquidity are expected to remain afloat backed by the high price.
The ratings reflect Sadiq Feeds (Pvt.) Ltd.'s ('Sadiq Feeds" or "the Company) association with an established poultry group, Sadiq Group. The Company is part of the Group’s integrated poultry chain – oil/meal, feed, and poultry. During the year, the ownership and asset transition has been achieved. The new Sponsors inherited 2 layers and 3 breeder units. Topline is concentrated on broiler feed with sales to group companies as a major source. The Company enjoyed good margins and profitability, however, recorded notably lower volumes due to the transfer of the Mandra mill to the other family. In order to combat price fluctuations of meal and maize, the Company reduced the quantum and holding period of raw materials. The financial risk profile of the Company is characterized by an improved working capital cycle, supplemented by transferred inventory and receivables to Mandra mill. This also aided the reduction in short-term debt availed to finance working capital requirements, strengthening the cashflow coverages and leverage position. The ratings incorporate potential support from Sponsors and/or group companies.
The ratings are dependent on the management's ability to manage business risk while sustaining business margins in the forthcoming challenges. Moreover, the governance framework needs attention. Going forward, continued harmonization between Sponsors and consistent generation of sustainable operational cashflows is important.

About the Entity
Sadiq Feeds was incorporated in 2005 and is primarily engaged in three different types of feeds - poultry feed, strain-specific layered feed, and cattle feed for birds and livestock of different types and age groups. The Company's feed manufacturing facility is situated in Sahiwal, with a production capacity of 130 MT/hour.
Previously, the Company's major shareholding was vested with Dr. Sadiq (70%), followed by his two sons, Mr. Asif Zubair (15%) and Mr. Salman Sadiq (15%). Presently, the ownership rests with Mrs. Saadia Sadiq (22%) and her sons: M. Arsal (25%), M. Sanan (27%), and M. Saad (27%).