Press Release

VIS Reaffirms Entity Ratings of Matco Foods Limited

Karachi, December 12, 2022: VIS Credit Rating Company Limited (VIS) has reaffirmed the entity ratings of ‘BBB+/A-2’ (Triple B- Plus/ A-Two) assigned to Matco Foods Limited (MFL). Outlook on the assigned ratings is ‘Stable’. The long-term rating of ‘BBB+’ signifies adequate credit quality where protection factors are reasonably sufficient. Risk factors may vary with possible changes in the economy. The short-term rating of ‘A-2’ signifies good certainty of timely payment. Liquidity factors and company fundamentals are sound. Access to capital markets is good. Risk factors are small. Previous rating action was announced on January 28, 2022.

Assigned ratings take into account the global supply chain crisis coupled with higher freight costs leading to shift in demand for non-basmati rice. Ratings also take note of Pakistan’s agricultural industry which was severely impacted by the damage caused by flooding owing to excessive rainfall during FY22. Shortage of canal water also impacted plantation of rice nurseries across the country where Sindh incurred the most of production losses. Despite incurring production losses and reserving rice stocks for local consumption, the country is expected to have adequate stocks of exportable rice available.

During FY22, the Company successfully dispatched orders from its recently setup cornstarch plant, the Company now aims to introduce more cornstarch variants into its product line for catering customized needs of various industries including textile, paper, food and pharmaceuticals, hence going forward, the Company expects to increase grinding and warehousing capacity of the division in the medium term. During FY22, the Company’s earning profile witnessed uptick owing to higher volumetric sales and rupee devaluation. The Company’s margins also improved on account of inventory gains, exchange gains and increase in average selling price. The Company’s topline was also supported by international rice glucose sales while local glucose sales witnessed a decline on account of higher raw material cost arising from the country’s poultry sector.

Assessment of financial profile of the Company indicates improvement in the Company’s profitability which improved Funds Flow from Operations (FFO). FFO/Total debt and FFO/Long Term Debt have also slightly improved but remain low relative to historical levels. While liquidity metrics continue to remain adequate, the same is expected to come under pressure on account of higher working capital requirements to support new business segments as well as higher commodity prices. Capitalization indicators depict increase on timeline basis, while short term debt is expected to increase on account of working capital constraints, the Company may issue a Rs. 1.25b commercial paper to further support the same. Long term borrowings are also expected to increase in order to fund planned CAPEX for the coming half in order to expand its new Dextrose Monohydrate unit, the project will be funded through a mix of equity and long term financing schemes. Going forward, overall capitalization indicators are expected to increase further during the rating horizon, while maintaining the same under the benchmarks of given rating along with improvement in liquidity is important from the rating perspective.

For further information on this rating announcement, please contact Ms. Syeda Batool Zehra Zaidi (Ext: 210) or the undersigned (Ext: 207) at 35311861-66 or email at

Sara Ahmed

Applicable Rating Criteria: Corporates (August 2021)

Information herein was obtained from sources believed to be accurate and reliable; however, VIS Credit Rating Company Limited (VIS) does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information.VIS , the analysts involved in the rating process and members of its rating committee do not have any conflict of interest relating to the rating(s)/ranking(s) mentioned in this report.VIS is paid a fee for most rating assignments. This rating/ranking is an opinion and is not a recommendation to buy or sell any securities. Copyright 2022 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .

VIS Credit Rating Company Limited