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The Pakistan Credit Rating Agency Limited
Press Release

Date
03-Jun-22

Analyst
Sohail Ahmed Qureshi
sohail.ahmed@pacra.com
+92-42-35869504
www.pacra.com

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This press release is being transmitted for the sole purpose of dissemination through print/electronic media. The press release may be used in full or in part without changing the meaning or context thereof with due credit to PACRA

PACRA Assigns Initial Entity Ratings to Reem Rice Mills (Private) Limited

Rating Type Entity
Current
(03-Jun-22 )
Action Initial
Long Term A-
Short Term A2
Outlook Stable
Rating Watch -

Reem Rice Mills (Private) Limited (‘Reem Rice’ or ‘the Company’) is primarily engaged in the milling, reprocessing, & sale of rice catering to national & international clientele base. It is a joint venture between two prominent groups from the Middle East - Al Muhaidib Group of Saudi Arabia and Al Ghurair of United Arab Emirates. The ratings reflect Reem Rice’s strong sponsorship background underpinned by their commitment of continuing support to the Company. Pakistan has two major rice-producing regions; Punjab and Sindh due to water availability, agro-climatic and soil conditions. During FY2022, the country’s milled rice production is expected to ramp up by ~3% led by growing area under cultivation. Pakistan’s basmati rice is considered high grade premium quality rice in the market overseas, particularly in the EU and Middle East. The sector is significant in terms of export proceeds; average rice exports are expected to increase by ~11% on back of larger crop, ample supplies and continued competitive prices viz-a-viz India. However, in global markets, India is currently facing challenge owing to higher amount of pesticides added in rice production. In Pakistan, local consumption of rice increases by ~8%. Reem Rice has been exporting premium quality rice to the Middle East countries along with new clients added in the portfolio from other European countries. Around ~65% of the Company’s revenue is drawn from exports. Over the years, Reem Rice has suffered losses on account of plant inefficiencies, toll manufacturing, unreasonable distribution agreements, high concentration (supplier & customer), inefficient financial management, and weak systems. Nevertheless, with new management induction, the Company is moving towards factory overhauling, value-added benefits, channeling local sales, and availing low-cost financing. Going forward, the Company envisaged to materialize the strategies through tapping new export markets, thoughtful expansion in local market, better pricing model, efficient utilization of funds, optimal plant operations, peak season procurement, inhouse processing, and improve liquidity profile. Financial risk of the Company is high with stretched cash cycle, disturbed coverages, and inadequate capital structure. The same is covered by way of direct comfort drawn from foreign sponsors.
The ratings are dependent on rationalization of the management’s strategies to gain position in global market under challenging business environment. With growth in revenue; profit margins and stable financial risk profile shall remain imperative.

About the Entity
Reem Rice Mills (Pvt.) Limited was incorporated in 1994, as a joint venture between Al Muhaidib Development Co. and Al Ghurair Investment LLC. The entire ownership resides with the parent companies. Al Muhaidib Group is one of the largest conglomerates in Saudi Arabia having multiple investment arms in food & consumer, real estate, industrial & infrastructure, and other financial sectors. Whereas, Al Ghurair also holds diversified investment including foods, resources, properties, construction, energy, mobility and other ventures.
Reem Rice is involved in the manufacture and export of premium quality rice. The Company has 10 MT/Hour milling plant capacity and 5 MT/Hour reprocessing plant capacity. Company’s board comprises five members – three from Al Ghurair whilst two represents Al Muhaidib. Currently, Mr. Khalid Farooqi is the CEO of Reem Rice. Previously, he was associated with Mayar Foods (Al Muhaidib’s flagship Co.) and holds over 25 years of experience.

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.