PACRA maintains Entity ratings of Mehmooda Maqbool Mills Limited

The ratings reflect Mehmooda Maqbool Mills Limited's ("Mehmooda Maqbool" or "the Company") established presence across the edible oil sector and its association with textile sector entity. The Company has also diversified into the flour segment. Over time, the Company has experienced advantages stemming from an enhanced customer base and expanded geographical presence. The given rating is further supported by the extensive experience of its sponsors in the edible oil and agriculture business. Additionally, Mehmooda Maqbool Mills' operations are strengthened by a highly qualified and experienced management team. Edible oil is one of the highest imported commodities in Pakistan. In FY24, the total imports of edible oil, including oil extracted from imported oilseeds, clocked in at ~2.717mln metric tons, with a cumulative value of PKR 794bln. The high import volume and cost reflect the growing consumption needs, fluctuations in global commodity prices, and exchange rate variations affecting the overall expenditure on edible oil imports. Due to the rise in input costs, especially raw material cost, many companies have experienced a reduction in their profit margins and faced working capital shortages. The industry's future outlook is developing due to price volatility and PKR depreciation. Despite prevailing economic constraints, the Company achieved robust revenue growth of 26% during the period. The Company’s topline is comprised of meal (34%), flour (27%) and cooking oil (38%). Due to the ban on GMO seeds, meal sales decreased by 28%. Mehmooda Maqbool Mills Limited experienced an increase in revenue, primarily driven by growth in flour sales. The improved sales performance, coupled with efficient management of operating expenses, led to an expansion in both gross and operating profit margins. However, elevated finance costs exerted downward pressure on net profit margins. Following this trajectory, the Company resulted in a deterioration of coverage ratios. Despite this, the Company's financial risk profile remains adequate, supported by improved cash flows. The Company's capital structure is highly leveraged, with short-term borrowings comprising 93% of total debt. The continued support of the sponsors provides further comfort to the credit rating.
The ratings are dependent on the management's ability to maintain growth in business volumes while sustaining margins and profitability. Prudent management of leveraged capital structure is crucial. Effective changes in governance framework would be beneficial for the ratings.

About the Entity
Mehmooda Maqbool Mills Limited was incorporated in 1968, and is principally engaged in solvent extraction from oilseed, oil & ghee refining and flour milling. Solvent extraction units have a combined installed capacity of 400MT/day. Oil refining unit has an installed capacity of 72MT/day. Whereas, the flour mill has total installed capacity of 240MT/day. Moreover, the Ghee Mill has a total refining capacity of 100MT/day. The Board is dominated by the Sponsoring family, and is Chaired by Mr. Tanvir Ahmad Sheikh, whereas, Mr. Mian Bakhtawar Tanvir Sheikh is the CEO. They are assisted by a team of professionals.