PACRA maintains Entity Ratings of Shujabad Agro Industries (Pvt.) Limited

The ratings reflect Shujabad Agro Industries (Pvt.) Limited's established brand equity for its premium (Eva Oil) and middle tier (Maan Ghee) brands. The Company maintains a well-defined ownership structure, and strategic board committees promote strong corporate governance and drive strategic value creation. Shujabad Agro's organizational structure is aligned with its operational requirements to ensure effective performance. Edible oil is one of the most imported commodities in Pakistan. During the year, 2.717 million tonnes of edible oil (including oil extracted from imported oilseed) of value PKR 794 billion was imported. Local edible oil production remains at 0.471 million tonnes. Due to the rise in input costs, especially raw material costs, many companies have experienced a reduction in their profit margins and faced working capital shortages. The Company's topline decreased by 13% due to a reduced supply of soybean seed. Despite these challenges, the Company successfully launched its own brand of shortening, "Bake Right," and maintained its margins. The decrease in production costs, resulting from lower volumes, contributed to a stable gross profit margin. However, a slight increase in operating expenses led to a minor decline in operating profit margins. Additionally, higher finance costs resulted in a slight contraction of net profit margins. As an importer of edible oilseed, the Company remains susceptible to industry risks, including currency fluctuations and raw material costs. Shujabad follows a cautious approach for its procurement and avoids inventory pile-up. However, recently, the Company experienced a slight increase in inventory days. Elevated finance costs have resulted in weakened debt coverage ratios. The Company maintains a moderately leveraged capital structure, with short-term debt comprising the majority of its debt portfolio. Support from the sponsor provides financial strength to the Company.
The ratings are dependent 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.

About the Entity
Shujabad Ago Industries (Pvt.) Limited is incorporated as a private limited company in Pakistan, since Feb 2000. The Company is primarily engaged in edible oilseed crushing/solvent extraction, refining, oil and ghee manufacturing, and its packaging. It also sells soymeal, canola and sunflower meal in local and export markets. The Company is competing in the premium edible oil segment with ‘Eva’ and the middle-tier ghee segment with ‘Maan’. Shujabad Agro is majorly ~60% owned by the family members of Mr. Shakil Ashfaq. The remaining ~40% of the shareholding resides with Ms. Bushra Asad. The C.E.O., Mr. Shakil Ashfaq is assisted by a team of professionals.