Neelum Oil and Ghee Industries (Pvt.) Limited (‘Neelum Oil and Ghee’ or ‘the Company’) was incorporated in 2019 under the Companies Act, 2017, as a Private Limited Company.

Mr. Sheikh Abdul Waheed, founder of Waheed Group of Industries (‘the Group’) started his business journey in the tea industry in the 1970s. Later, in 1988 he entered the edible oil industry The Group's significant combined production capacity, exceeds 850 million tons per day for vegetable ghee and edible oil. In 1993, the Group started its first venture Waheed Hafeez Ghee Industries (Pvt.) Limited in Hattar, KPK which currently has the capacity to produce 350. The company generates an annual turnover of over three hundred and fifty million US Dollars ($350 million), contributing significantly to the country’s economy. MT per day of vegetable oil/ghee. Waheed Group of Companies is also one of the largest entities in the field of manufacturing and import of edible oil, bulk import and distribution of Crude Palm Oil, RBD Palm Oil, RBD Palm Olein, import of various food industry chemicals, Electrolytic Tinplate Sheets, import and sale of Compressed Natural Gas (CNG) Equipment and Stations, running of (CNG) Filling Stations, and Real Estate and construction of Commercial Buildings. The group also deals in shortening.Additionally, Waheed Group of Companies maintains a presence in the hospitality industry with its hotel venture, ‘Laraib Inn’. Demonstrating a commitment to agricultural diversification and local development, the group has recently invested in olive farming, acquiring over 1000 acres of land for this purpose.

The Company is primarily engaged in the process of refining crude palm oil; producing and selling cooking oil/ghee. Capacity utilization is dependent on the local demand and availability of RBD, Olein, SBO which is primarily imported from U.A.E, Europe and the USA. The Company has a production capacity of 300MT per day. The Company sells branded oil includig Fauji Supreme, Islamabad, Perlli, Phool, Zeenat.

The Company exhibits a highly centralized, family-owned ownership structure wherein the shareholding is concentrated among three brothers. Awais Karni maintains a controlling interest with a majority stake of 65.68%, while Hamad Waheed and Faad Waheed hold 17.25% and 17.07% respectively.

The Company benefits from complete ownership by the sponsoring family, achieved through a structure comprising both associated corporate entities and direct individual shareholdings. Its position as a leading supplier of cooking oil and banaspati in northern Pakistan highlights a robust market presence. The affiliation of Neelum Oil and Ghee Industries with the Waheed Group underscores its operational stability.

The Group has successfully navigated business cycles in the edible oil sector, sustaining their market position for the past 30 years. Beyond edible oil, the sponsors have established a significant presence in the transport, hotel, and energy sectors. Mr. Awais Karni is one of the key directors of the group and has lamented himself as a seasoned veteran of the palm oil industry with an experience of more than 18 years and has credited himself by creating and managing various brands of cooking oil and ghee which includes our flagship premium brand, Fauji Supreme. Mr. Faad Waheed is Director Operations and PR of the group. He has been the Senior Vice President Islamabad Chamber of Commerce and Industries (2022-2024). Graduated from York University, Canada, Mr. Hammad he joined WGC and introduced various new systems in the organization related to HR and Finance. In 2023, under the Guidance of his father, he established state-of-the-art edible oil refinery at Waheed Hafeez Ghee Industry, Hattar, Pakistan.

The Group is predominantly composed of Companies engaged in various aspects of the edible oil value chain, reflecting a focused and vertically integrated business model. Beyond the inherent financial strength of the Group, the sponsoring family holds considerable personal net worth. This financial capacity positions them to extend timely support to the Company, should adverse economic or industry-specific challenges arise, thereby enhancing the Company's financial resilience and credit profile

The Board of Directors is not fully independent from the Company's management. It comprises four members, including the Chief Executive Officer, which may limit the degree of independent oversight.

The BoD is a key source of oversight and guidance for the management of all Group Companies. The Board’sChairman, Mr. Abdul Waheed has been associated with the edible oil industry from almost 40 years. He has also served as the chairman Pakistan Banaspati Manufacturer’s Associated for 4 years. Furthermore, he is currently themember of Rawalpindi Chamber of Commerce, Federation of Pakistan Chamber of Commerce & Industry (FPCCI),Haripur Chamber of Commerce & Industry (HCCI) and SAARC Chamber of Commerce. Mr. Awais Karni, ExecutiveDirector, is associated with the Company’s Board from 2011 with over 18 years of experience in the palm oilindustry. He holds higher education degree from Canada and has attended several Edible Oil conferences acrossthe globe.

The Board has not established any formal sub-committees such as audit, risk, or nomination committees. Instead, board members convene informally to deliberate on key matters as they arise. While this approach facilitates flexibility and timely decision-making, it may limit the structured oversight and governance typically associated with formal committee structures.

The external auditors of the Company, Zafar & Co Chartered Accountants, have expressed an unqualified opinion on the financial statements of the Company for the year ended Jun-24. The firm has been QCR-rated by ICAP but not in the panle of SBP.

The organizational structure has been optimized as per the operational needs. The Company operates through three functions: Production, Finance, Distribution and Sales. All functional managers’ report to the Company’s CEO. The CEO makes all pertinent decisions of the Group. As the Company’s CEO is responsible for the whole unit, thus highlighting the key man risk of management.

The overall control of the Company vests with Board’s Chairman, who is also the Group’s Chief Executive Officer. Hence, there is no segregation of responsibilities. Mr. Abdul Waheed has been associated with the edible oil industry from almost 30 years. He started his career in the tea industry and later entered the edible oil industry by establishing his own cooking oil/ghee production units and companies. Apart from edible oil, the sponsors also have presence in the transport, hotel, and energy sectors as well. Mr. Karni has kept himself engaged in the palm oil industry further by becoming Vice President ofPakistan Vanaspati Manufacturer’s Association (PVMA) from 2011 to 2012. He has also received the award for“Highest Importer of Palm Oil” from Pakistan Edible Oil Conference (PEOC) in 2018. During his 10 years in WGC, Mr. Awais Karni has garnered many achievements which include receiving a gold medal from the President of Pakistan for “Highest Importer of Edible Oil” in 2018.

The Company currently does not have any formal management committees in place. This absence of dedicated committees may impact the ability to address specific operational or strategic issues with the focused attention and accountability typically provided by specialized management teams.

The Company employs SAP (Systems, Applications, and Products in Data Processing) as its enterprise resource planning (ERP) system. This robust software solution integrates key business processes across finance, supply chain, operations, and human resources, enabling real-time data management, streamlined workflows, and improved decision-making capabilities

The Company has an in-house Internal Audit Department, which reports directly to the Chief Executive Officer (CEO). This structure ensures that audit findings are communicated promptly and directly to senior management for effective oversight and decision-making.

Edible oil is one of the highest imported commodities in Pakistan. During the year, 2.717 million tonnes of edible oil (including oil extracted from imported oilseed) of value Rs 794 billion was imported. Local edible oil production remains at 0.471 million tonnes. In line with population growth, edible oil demand is forecast to grow about 5% and palm oil imports grew accordingly, reaching 3.6mln tons in FY24. The price of Soybean oilseed stood at 479 USD/MT in Jun-24 as compared to 591 USD/MT in the comparative year, showcasing a decrease of ~18%. On the other hand, the price of palm oil stood at 873 USD/MT in Jun-24 and 816 USD/MT in Jun-23, which is forecasted to ease further. Comparatively reductions in selling prices have impacted the revenues substantially for the refineries. 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. With expectations for better cottonseed production, Total oilseed production in 2024/25 is projected to decrease marginally to 3.43 million tons, due to an expected minor decline in cottonseed production, and no growth in rapeseed and sunflower seed output. The industry's future outlook is developing due to price volatility and PKR depreciation.

Being a small player in the edible oil industry of the country, the Company exhibits a positive growth trajectory, indicating potential for increased market penetration and expansion.

As a burgeoning entity, the Company has demonstrated a robust and consistent upward trend in revenue generation, evidenced by its financial performance over the past three fiscal years (FY24: PKR 32 billion, FY23: PKR 30 billion, FY22: PKR 1.1 billion). A significant factor contributing to this impressive growth trajectory has been the Company's strategic emphasis on expanding its regional sales coverage within the northern region. This focused approach has demonstrably strengthened its market presence and facilitated increased sales volumes. The Company's sales are exclusively derived from local markets, centered around its portfolio of branded cooking oil and ghee products, which includes well-established names such as Fauji Supreme, Islamabad, Perlli, Phool, and Zeenat.

The Company's operations are subject to foreign currency risk arising from the import of its primary raw material, Refined, Bleached, and Deodorized (RBD) Palm Olein, which is sourced predominantly from the USA and the U.A.E. The pricing of these imports exhibits volatility influenced by the interplay of global demand and supply forces. During FY24, the Company experienced a contraction in its gross profit margin, which stood at 2.1% compared to 3.9% in FY23. This decline was primarily driven by an increase in the cost of raw materials. Consequently, the operating profit margin also decreased to 1.9% in FY24 (FY23: 3.8%), reflecting an increase in operating costs. The net profit margin for the same period also registered at 1.9% (FY23: 3.8%), indicating challenges in efficient expense management that further impacted overall profitability.

Since its inception, the Company has exhibited a consistent growth trajectory. Building upon this foundation, the Company now possesses a heightened drive towards future expansion, underpinned by a clearly defined strategic direction within the industry-specific ecosystem.

The Company's working capital requirements are facilitated through a short-term running finance facility secured from a consortium of banking institutions. An analysis of the Company's working capital cycle reveals a deterioration in key efficiency metrics during Fiscal Year 2024. Average inventory holding days increased to 10 days (FY23: 3 days), indicating a slower turnover of inventory. Similarly, trade receivable days lengthened to 20 days (FY23: 12 days), suggesting a slower collection period for outstanding receivables. Consequently, the gross working capital days extended to 31 days in FY24, a notable increase from 15 days in the prior fiscal year. While trade payable days also experienced a slight increase to 6 days (FY23: 4 days), the more significant extensions in inventory and receivable days resulted in a substantial increase in net working capital days, which stood at 25 days in FY24 compared to 11 days in FY23. This elongation of the working capital cycle may indicate potential inefficiencies in inventory management and credit policies, warranting closer scrutiny for potential impacts on the Company's liquidity and operational efficiency.

The Company's interest coverage, a key indicator of its ability to service debt obligations, is a function of its free cash flows relative to its finance costs. In Fiscal Year 2024, the Company generated free cash flows of PKR 657 million, a decrease from PKR 1.2 billion in the preceding fiscal year. Concurrently, finance costs decreased to PKR 1 million in FY24 from PKR 3 million in FY23. Consequently, the Company's interest coverage ratio improved significantly to 1082x in FY24, compared to 432x in FY23. This notable increase is primarily attributable to the substantial reduction in finance costs, which more than offset the decrease in free cash flows. While a higher interest coverage ratio generally indicates a stronger capacity to meet interest payments, the underlying drivers, specifically the decrease in both free cash flows and finance costs, warrant further examination to assess the sustainability of this improved coverage. Analysts would typically delve deeper into the reasons for these fluctuations to ascertain the overall financial health and risk profile of the Company.

During FY24, the Company exhibits a moderately leveraged capital structure, with a debt-to-equity ratio of 34%. This indicates a relatively lower reliance on debt financing compared to its equity base. Notably, the composition of the Company's debt portfolio consists entirely of short-term borrowings, representing 100% of its total debt. The Company's total debt outstanding amounted to PKR 1.1 billion in FY24, a marginal increase from PKR 1.0 billion in FY23. Concurrently, the Company's equity base has shown consistent growth, reaching PKR 1,978 million in FY24, up from PKR 1,337 million in FY23. The low debt-to-equity ratio suggests a degree of financial flexibility. However, the exclusive reliance on short-term debt exposes the Company to potential refinancing risks and interest rate fluctuations. While the current leverage appears manageable, analysts would typically monitor the Company's refinancing plans and its ability to manage short-term obligations, particularly in the context of its operating cash flows and the prevailing macroeconomic environment. The growth in equity provides a positive buffer, but the short-term nature of all debt warrants ongoing assessment.