Press Release
Ratings of Shakarganj Food Products Limited
Karachi, July 03, 2024: VIS Credit Rating Company Limited (VIS) has maintained the entity ratings of Shakarganj Food Products Limited (SFPL or “the Company”) at ‘BBB-/A-3’ (Triple B Minus/A-Three). Outlook on the assigned rating has been revised from ‘Negative’ to ‘Stable’. Meanwhile, the instrument rating has been revised from ‘BBB+’ (Triple B Plus) to ‘BBB-’ (Triple B Minus). The medium to long-term rating of ‘BBB-’ denotes adequate credit quality; protection factors are reasonable and sufficient. Risk factors are considered variable if changes occur in the economy. The short-term rating of ‘A-3’ denotes satisfactory liquidity and other protection factors qualifying entity as investment grade. Risk factors are larger and subject to more variation. Nevertheless, timely payment is expected. Previous rating action was announced on August 18, 2023.
SFPL is a subsidiary of Shakarganj Mills Limited (SML), with 52.4% shareholding, an associate of BankIslami Pakistan Limited and also has Crescent Steel & Allied Products Limited as a minority shareholder, forming an adequate sponsorship profile. The Company has a moderate business risk environment underpinned by in-elastic demand of milk and related products. However, competition has remained intense to grab market share amongst producers of packaged milk and related products. Moreover, the industry margins have remained sensitive to exchange rate risk and price risk pertaining to imported skimmed milk powder and edible oils. The Company has encountered low-capacity utilization in FY23 and onwards. Despite higher prices, revenue decreased on account of lower volumetric sales. However, margins and profitability increased in FY23. Coverages improved though liquidity in terms of current ratio is still inadequate. Improving trend in capital structure has been witnessed; gearing has remained low.
Rated, secured, privately placed, shariah compliant sukuk certificates of PKR 725m were issued in July 2018 for a tenor of 6 year, with quarterly principal buy-out & rental payments, inclusive of 1 year grace period for buy-out payments. The Sukuk subsequently underwent investor supported reprofiling/restructuring and the remaining amount of Rs 326.25 million is now planned to be redeemed from July, 2024 onwards. The sensitized projections of the company have depicted sufficient cash flows to cover the remaining sukuk repayments in a timely manner. The ratings are sensitive to projected financial performance and remain dependent on improving overall financial metrics, going forward.
For further information on this rating announcement, please contact at 042-35723411-12 or email at info@vis.com.pk
VIS Entity Rating Criteria: Corporates
https://docs.vis.com.pk/docs/CorporateMethodology.pdf
Rating the Issue
https://docs.vis.com.pk/docs/Rating-the-Issue-Aug-2023.pdf
VIS Rating Scale
https://docs.vis.com.pk/docs/ratingscale.pdf