Press Release

VIS Reaffirms Entity Ratings of Matco Foods Limited

Karachi, January 06, 2025: VIS Credit Rating Company Limited has reaffirmed the entity ratings of Matco Foods Limited (MFL) at ‘BBB+/A2’ (Triple B Plus /A Two). The long-term rating of ‘BBB+’ signifies adequate credit quality with reasonable and sufficient protection factors. Risk factors are considered variable if changes occur in the economy. Short term rating of ‘A2’ denotes good certainty of timely payments coupled with sound liquidity and company fundamentals. Outlook on the assigned ratings is ‘Stable’. Previous rating action was announced on December 29, 2023

Matco Foods Limited (MFL), established in April 1990 in Karachi as a private limited company, was listed on the Pakistan Stock Exchange in February 2018. The Company specializes in processing and exporting rice and related products, operating under the brand name "Falak." MFL's product portfolio primarily includes basmati rice, rice glucose, rice protein, rice maltodextrin, corn starch, Himalayan pink salt, and a variety of gourmet salts, spices, dessert mixes, and other specialty items. The Company manages five rice processing and milling plants equipped with paddy drying, storage, and husking facilities, located in Sadhoke (Punjab) and Karachi (Sindh). Additionally, its corn starch production plant is based in Faisalabad, Punjab.

In FY24, the Company recorded a notable improvement in topline performance, fueled by favorable market conditions, increased sales volumes, and price adjustments. Export sales contributed 59% of total sales, with local sales making up the remaining 41%. The rice category was the primary revenue driver, representing 68% of net sales, followed by the corn starch division at 18%, rice glucose at 12%, and Falak Spices at 3%. Despite robust revenue growth, profit margins were constrained due to elevated raw material costs and higher financial charges, resulting in a negative bottom line. However, margins are projected to recover, driven by interest rate cuts and diversification into additional product lines, including the corn starch and rice glucose divisions. The liquidity and capitalization profile faced challenges arising from elevated gearing and leverage ratios, subdued debt servicing capacity due to high financial charges, and significant cash outflows from consecutive years of capital expenditures. However, with no major additional capex in the pipeline and anticipated improvement in margins coupled with strong projected volume growth, financial metrics are expected to improve. Going forward, ratings will remain underpinned on sustained sponsor support and a recovery in financial metrics.

For further information on this rating announcement, please contact the undersigned at 042-35723411-12 or email at info@vis.com.pk

Applicable Rating Criteria:
VIS Entity Rating Criteria: Corporates
https://docs.vis.com.pk/docs/CorporateMethodology.pdf
VIS Rating Scale
https://docs.vis.com.pk/docs/ratingscale.pdf

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