Press Release

VIS Reaffirms Entity Ratings of Olympia Oils (Pvt.) Limited

Karachi, December 6, 2023: VIS Credit Rating Company Limited (VIS) has reaffirmed entity ratings of Olympia Oils (Pvt.) Limited (OOL) at 'A-/A-2' (Single A Minus/A-Two). Medium to long term rating of 'A-' indicates good credit quality; Protection factors are adequate. Risk factors may vary with possible changes in the economy. Short term rating of 'A-2' indicates good certainty of timely payment. Liquidity factors and company fundamentals are sound. Access to capital markets is good. Risk factors are small. Outlook on the assigned ratings remains Stable. Previous rating action was announced on October 11, 2022.

OOL is primarily engaged in the production and sales of edible oil and oil meal using solvent extraction process. OOL is the flagship company of “Monnoo Group” with diversified business interests in textile, poultry, carpets, chemicals & synthetics. The ratings incorporate the business risk profile of the edible oil industry characterized by price sensitivity of imported raw material, exchange rate fluctuations and the competitive landscape. However, assigned ratings draw strength from moderate business risk profile based on majority of the revenue emanating from bulk sales to institutional clients thereby avoiding competition from mainstream branded oil market.

The rated entity's industry and business risk profile has been significantly affected by external factors such as the government regulations on the import of Genetically Modified Organism (GMO) seeds, which led to a substantial portion of the company's inventory being held at port. As a result, capacity utilization significantly reduced in FY23. However, while volumes were lower, the Company managed to improve its overall margins on the back of higher commodity prices. Consequently, profitability recorded an uptick despite Company booking a provision for loss against damaged stock due to delays at port. Funds from Operations (FFO) also surged leading to improved coverage ratios. However, capitalization profile remained constrained due to elevated levels of short-term borrowings against inventory stuck at port. With enhancement in working capital cycle and reduced short-term borrowing coverage against stocks and book debts, liquidity profile also remained under pressure. However, ratings draw comfort from sound debt servicing coverage. Going forward, ratings remain sensitive to maintenance of
profitability profile, and improvement in liquidity and capitalization indicators.

For further information on this ratings announcement, please contact Nikeeta Rani at 021-35311861-64 (Ext. 215) and/or the undersigned at
021-35311861-64 (Ext. 207) or email at
Sara Ahmed

Applicable Rating Criteria: Corporates (May 2023):

VIS Issue/Issuer Rating Scale

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