The Pakistan Credit Rating Agency Limited
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Faiqa Qamar

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

Rating Type Entity
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 8 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 6MFY19, the Company's topline witnessed an incline despite volatile demand in the poultry industry. Moreover, procuring raw materials - maize and meal, 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. Operating with high leveraging, primarily in the form of short-term borrowings, to fund the inventory and providing financial support to other group companies. Due to increased borrowings, the Company's financial profile; in turn, coverages remain stressed.
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.

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.