PACRA maintains Entity Ratings of Punjab Oil Mills Limited

The ratings assigned to Punjab Oil Mills Limited ("Punjab Oil" or "the Company") reflect its well-established presence in the edible oil sector, particularly in vegetable oil and ghee. The Company benefits from the growing brand equity of its flagship products, Canolive and Zaiqa. The rating of the Company is further supported by the extensive industry experience of its sponsors. Additionally, Punjab Oil’s operations are strengthened by a highly qualified and experienced management team. The strategic board committees are also established to enhance corporate governance and drive long-term value creation. Edible oil remains one of the most imported commodities in Pakistan. During the year, the country imported ~2.717mln MT of edible oil (including oil extracted from imported oilseeds) at a value of ~PKR 794bln, whereas local production stood at 0.47mln MT. Rising input costs, particularly in raw materials, have pressured profit margins across the sector, leading to working capital constraints for many companies. As Punjab Oil does not own crushing facilities, it relies on the procurement of oil for refining. Volatility in oil prices constrained the Company's ability to fully pass on cost increases to consumers, leading to an 18% decline in topline revenue (FY23: 11%). This decline was primarily driven by reduced demand for the Company's mid-tier product line, reflecting weakened consumer purchasing power. Despite these challenges, Punjab Oil achieved improved gross profit margins in FY24 through strategic cost efficiencies in raw material procurement. These measures contributed to a modest increase in operating profits, reflecting effective management of operating expenses. However, gains in profitability were offset by higher finance costs and taxation, ultimately resulting in a net loss of 0.5% for FY24. This financial outcome may have implications for the Company's future credit ratings. In response to these market challenges, Punjab Oil has undertaken strategic diversification by launching a new coffee line under the brand "Tru Bru." Additionally, the recent appointment of Mr. Ehtisham as Chief Executive Officer has instilled optimism regarding the Company's future prospects. POML's gross working capital cycle was negatively impacted by a deterioration in receivable days. While the Company maintains a low leverage capital structure, its leverage ratio has deteriorated due to a rise in short-term borrowings. The Company's working capital cycle is supported by considerable borrowing cushion at the trade level. Sponsors provide financial backing and strategic support to the Company.
The ratings are dependent on the management’s ability to improve profitability and gain market share, while maintaining prudent working capital management. Substantial increase in leveraging may impact ratings.

About the Entity
Punjab Oil Mills Limited, most famous for its flagship brands Canolive and Zaiqa, is a public listed company. The Company was incorporated in 1983 and commenced operations in 1984. The primary business activity of the Company involves manufacturing and sale of ghee, cooking oil, specialty fats, laundry soap, mushrooms, and coffee. The Company has its production facility located at Industrial Triangle in Islamabad. The Company has the production capacity to process 14,000 M.T of Ghee/Specialty fats and 19,000 M.T of Cooking Oil.
Three families, namely, Jahangir Family, Malik Family, and Batla Family have a shareholding in the Company. Other shareholders include NIT, Mutual Funds, Financial Institutions and the general public. Mr. Ehtisham is the CEO of the Company and is assisted by a team of experienced professionals.