PACRA Maintains Entity Ratings of Pakistan Oil Mills (Pvt.) Limited

The ratings reflect Pakistan Oil Mills (Pvt.) Limited's (or 'the Company') established presence across the edible oil sector, encompassing growing brand equity for its edible oil brands (Naz, Pak, Sun, and Pure) and its association with a large industrial group that has ventured into edible oil and textile. The given rating is further supported by the extensive experience of its sponsors in the edible oil and agriculture business. The operations of the Company are strengthened by an experienced and qualified management team. Pakistan's edible oil industry is heavily reliant on imports since oilseeds and edible oil account for ~80% of the cost of production. During the year, 2.7mln tonnes of edible oil (including oil extracted from imported oilseed) of value PKR 794bln (US $ 2.8bln) was imported as compared to 2.2mln tonnes in FY23. Local edible oil production remains at 0.47mln tonnes (FY23: 0.504mln tonnes). Pakistan also faced various challenges, including disease outbreaks, high production costs, non-availability of locally grown crops like soybeans, and increasing interest rates. However, the industry is expected to be stable in FY25 on account of improving macroeconomic indicators and reduced interest rates. In FY24, edible oil prices, including palm oil reduced by ~20%. During FY24, the Company faced a slight decline of ~13% in its topline resulting from low volumetric sales due to reduced purchasing power of consumers. However, the revenues stood on the stronger side when compared with peers universe owing to demand growth in edible oil segments, as well as targeted customer concentration guaranteeing both quality and punctual cash payments. Moreover, the Company is diversifying its revenue streams through the installation of a flour mill which will be operational soon. Margins are functions of timeliness and prudence of raw materials (Canola oilseed and RBD Palm olein) procurement. The Company has demonstrated a marginal decline in its margins this year. The decline is attributed to the inflationary factor resulting in a higher cost of production. Moreover, the rupee devaluation also had an impact on the import cost of raw materials. However, the Company's financial risk remains strong supplemented by strong coverages and a healthy working capital cycle. On the other side, leverage indicators continue to remain stable on account of lower debt comprising only of short-term borrowings for funding working capital requirements.
The rating depends on the management's ability to maintain its growing business volumes while sustaining margins and profitability. Prudent management of working capital and maintaining strong coverages is critical. Brand reputation through customer satisfaction remains vital for the given rating.

About the Entity
Pakistan Oil Mills (Pvt.) Limited was incorporated in April, 1960 as a private limited Company. The Company is primarily engaged in the process of seed filtering and crushing, refining of vegetable oil/ghee by mechanical and chemical processes and sells vegetable oil/ghee, canola meal, and other byproducts including laundry soap. The Company’s production facility, located in Kotri, Sindh, currently has oilseed crushing capacity of 400 MT per day and refining capacity of 280 MT of vegetable oil/ghee per day. The Company’s major ownership resides with Mr. Masood Pervez (~ 64%) and Mr. Muhammad Usman (~ 33%). Mr. Masood chairs the Company's Board and is also the CEO.