The Pakistan Credit Rating Agency Limited
29-Oct-19
Analyst
Ayesha Malik
ayesha.malik@pacra.com
+92-42-35869504
www.pacra.com
Applicable Criteria
- Methodology | Corporate Ratings | Jun-19
- Methodology | Correlation Between Long-Term And Short-Term Rating Scale | Jun-19
- Criteria | Rating Modifier | Jun-19
Related Research
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PACRA Maintains Entity Ratings of Shabbir Feed Mills (Pvt.) Limited
| Rating Type | Entity | |
|
Current (29-Oct-19 ) |
Previous (30-Apr-19 ) |
|
| Action | Maintain | Maintain |
| Long Term | BBB- | BBB- |
| Short Term | A3 | A3 |
| Outlook | Stable | Stable |
| Rating Watch | - | - |
The global feed industry can be valued at around ~$460bln, with poultry (~$166bln) constituting ~36% of the total industry. Pakistan produces ~8mln MT of feed annually with a total of ~150 registered feed mills and ~200 unregistered feed mills catering to it.
The ratings reflects Shabbir Feed Mills strong presence in Southern Punjab in its related fields – poultry feeds, broiler meat and table eggs. The Company's topline improved backed by higher volumes. Moreover, procuring raw materials - maize and meal, at relatively low cost benefited the margins. The Company has a long working capital cycle due to seasonal nature of inputs that leads to longer holding period. Financial risk remains high due to significantly leveraged capital structure ans mismatch at trade level as the Company provides financial support to other group companies. Due to high quantum of borrowings, the Company's coverages remain stressed. The ratings incorporates diversified business interests of the sponsors.
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 coverages remain critical. Meanwhile, strengthening of governance framework would be beneficial 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.