The Pakistan Credit Rating Agency Limited
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Shayan Farooq

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

Rating Type Entity
Action Maintain Maintain
Long Term BBB+ BBB+
Short Term A2 A2
Outlook Stable Stable
Rating Watch - Yes

Poultry industry is one of the largest agro based segment in Pakistan, comprising domestic & commercial poultry. The industry has posted an annual growth of ~ 10%-12% lately. Pakistan is sufficient in poultry meat and egg production. However, per capita protein consumption remains low when compared to the world's average. The industry generates an estimated annual revenue of ~ PKR 1,082bln from local and export sales. Due to Covid-19 outbreak, marriage halls/restaurants were closed. This, along with no exports of poultry products, led to supply glut in local market. Prices of poultry products, especially day-old chicks, posted a dip despite being an essential food item due to lower demand with many poultry farms becoming non-operational. Demand, and hence, prices have recovered lately, easing down the liquidity problems of the industry. Moreover, SBP measures have provided respite. As business avenues became operational, demand for poultry products has improved.
The ratings reflect Sadiq Poultry (Pvt.) Ltd.'s ('Sadiq Poultry" or "the Company') association with an established and vertically integrated poultry Group, Sadiq Group. The Company has an established profile in poultry industry and is a leader in broiler, chicken, eggs and day old chicks segment. Post Dr. Sadiq's demise, the transition of shareholding and division of roles of new sponsors have been completed successfully. The Company's topline surged and remains concentrated towards day old chicks and eggs sale. Initially, the Covid-19 breakout impacted the entire industry adversely, especially prices of day old chicks, affecting the Company's business profile. However, better volumes and stable prices of Eggs and day old chicks were achieved, as the countrywide reopening of restaurants and marriage halls improved the demand. Margins improved significantly, and the Company posted healthy profits in 3QFY21. Financial risk profile of the Company is characterized by moderate leverage and strong coverage ratios. The loan mix is skewed towards short term borrowings to fulfil the working capital requirements. Further, lower interest cost due to cumulative policy rate cuts has decreased the debt servicing burden. However, going forward, the optimum production and sales levels are anticipated if demand avenues (banquet halls, dine-in restaurants) remain operational and demand uncertainties subside. The ratings incorporate potential support from sponsors and/or Group companies.
The ratings are dependent on the management's ability to prudently manage business risk for perishable consumer products, while sustaining business margins in prevailing uncertain economic conditions. Going forward, consistently generating sustainable operational cashflows is important.

About the Entity
Sadiq Poultry (Pvt.) Limited is a successful parent venture of Sadiq Group, a well-known player of Pakistan’s poultry industry. It was incorporated in 2004 and is primarily engaged in operating 40 poultry farms, out of which 30 are breeder farms, 4 broiler units, 4 laying units and 2 hatcheries. The Company has its own livestock pharmaceutical setup, to ensure birds health.

After Dr. Sadiq's demise, the shareholding is divided between his two wives and six children: Salman Sadiq (42%), Asif Zubair (25%), Sanan Sadiq (9%), Saad Sadiq (9%), Saima Elahi (4%), Ayesha Bilal (4%), Rasheeda Begum (3%) and Saadia Sadiq (3%). The Company is headed by Mr. Asif Zubair, the eldest son of Dr. Sadiq, as the CEO. He is also the CEO of Zubair Feeds Pvt. Limited.

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.