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The Pakistan Credit Rating Agency Limited
Press Release

Date
07-May-18

Analyst
Faiqa Qamar
faiqa.qamar@pacra.com
+92-42-35869504
www.pacra.com

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This press release is being transmitted for the sole purpose of dissemination through print/electronic media. The press release may be used in full or in part without changing the meaning or context thereof with due credit to PACRA

PACRA Maintains Entity Ratings of Shabbir Feed Mills (Pvt.) Limited

Rating Type Entity
Current
(07-May-18)
Previous
(29-Dec-17)
Action Maintain Initial
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 drives its demand from poultry – chicken and eggs consumption. With growing income levels and expanding population, the demand for poultry stays robust, in terms of poultry feed as well. The industry is experiencing ~10% growth.

The ratings incorporate Shabbir Feeds strong presence in the southern Punjab in its related fields – poultry feeds, birds and eggs. This is underpinned by strong demand dynamics. Company has lately camped up its capacities and is catching on utilization levels. By achieving stability in production and ensuring efficiencies, margins are likely to benefit. Company is likely to pursue market penetration strategy. It has relatively long working capital cycle due to seasonal nature of inputs that leads to larger holding period, while receivable credit is adequate. Company operates with high leveraging, primarily in the form of short-term borrowings. They are used to fund inventory and advances/financial support to associates. Although, cashflows are adequate, given extended leveraging, coverages are constrained. Strong growth in poultry sector amidst improving macro-economic conditions and increasing population is expected to develop consumer demand.

The ratings are dependent on the management's ability to build profitable volumes while benefiting from positive demand fundamentals. Financial discipline is crucial; Strengthening of governance framework would be beneficial. The management should consider holding debt driven growth and improving debt mix.

About the Entity
Shabbir Feeds (Pvt.) Limited, is a developed venture of Shujabad Group. It was incorporated in 2001 and is primarily engaged in manufacturing and selling poultry feeds,table eggs and broiler meat. Company's feed mill, located in Multan, has a manufacturing capacity of 45 MT per hour.

Shabbir Feeds major shareholding vests with (Late) Mian Shabbir’s family (75%) with an equal stake divided among his five sons. Remaining of 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.

The primary function of PACRA is to evaluate the capacity and willingness of an entity to honor its obligations. Our ratings reflect an independent, professional and impartial assessment of the risks associated with a particular instrument or an entity. PACRA's comprehensive offerings include instrument and entity credit ratings, insurer financial strength ratings, fund ratings, asset manager ratings and real estate gradings. PACRA opinion is not a recommendation to purchase, sell or hold a security, in as much as it does not comment on the security's market price or suitability for a particular investor.