The Pakistan Credit Rating Agency Limited
01-Nov-18
Analyst
Ayesha Qasim
ayesha.qasim@pacra.com
+92-42-35869504
www.pacra.com
Applicable Criteria
- Methodology | Corporate Ratings | Jun-18
- Methodology | Criteria | Rating Modifier | Jun-18
- Methodology | Correlation Between Long-Term And Short-Term Rating Scale | Jun-18
Related Research
- Sector Study | Food and Allied | Poultry Feed | Mar-18
- Sector Study | Food and Allied | Poultry | Mar-18
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PACRA Maintains Entity Ratings of Shabbir Feed Mills (Pvt.) Limited
| Rating Type | Entity | |
|
Current (01-Nov-18 ) |
Previous (07-May-18 ) |
|
| Action | Maintain | Maintain |
| Long Term | BBB- | BBB- |
| Short Term | A3 | A3 |
| Outlook | Stable | Stable |
| Rating Watch | - | - |
Among the largest agro based segments in Pakistan, poultry holds a prominent place. In Pakistan, formal feed manufacturing started in early 1960. With 350 poultry feed mills and home mixtures, country annually produces around 10 MMT of poultry feed. This industry directly derives its demand from poultry – chicken and eggs consumption. With growing income levels and expanding population, the demand for poultry has substantial growth prospects. The industry is experiencing ~ 10% growth.
The ratings reflects Shabbir Feed Mills strong presence in Southern Punjab in its related fields – poultry feeds, broiler meat and table eggs. During FY18, the Company's topline witnessed a decline underpinned by volatile demand in the poultry industry. However, procuring raw materials - maize, at low cost benefited the margins. The Company's long working capital cycle is due to seasonal nature of inputs that leads to longer holding period. The Company operates with high leveraging, primarily in the form of short-term borrowings, to fund the inventory and advances/financial support to other group companies. This led to a stressed financial profile due to increased borrowings that stressed the coverages.
The ratings are dependent on the management's ability to build profitable volumes while maintaining its margins. Financial discipline is crucial. Improvement in the debt mix and better coverages will benefit the ratings. Meanwhile, strengthening of governance framework would be positive for the ratings.
About
the Entity
Shabbir Feed Mills (Pvt.) Limited, is an established venture of Shujabad Group. The Company was incorporated in 2001 and is primarily engaged in manufacturing and selling poultry feeds,table eggs and broiler meat. The Company's feed mill, located in Multan, has a manufacturing capacity of 45 MT per hour.
Shabbir Feed Mills major shareholding vests with (Late) Mian Shabbir’s family (75%) with an equal stake divided among his five sons. Remaining of the Company’s share (25%) resides with Mr. M. Akram, one of group’s founders. Mr. Qasier Shabbir - (Late) Mian Sahbbir’s eldest son, with his experience of fifteen years in poultry and textile businesses, leads the Group and the Company as its CEO.