Press Release

VIS Reaffirms Entity Ratings of Faisalabad Oil Refinery Limited

Karachi, August 16, 2024: VIS Credit Rating Company Limited (‘VIS’) has reaffirmed the entity ratings of Faisalabad Oil Refinery (Pvt.) Limited (FORL) at ‘A-/A-2’ (Single A Minus/ A-Two). The medium to long-term rating of ‘A-’ signifies good credit quality and adequate protection factors. Risk factors may vary with possible changes in economy. The short-term rating of ‘A-2’ denotes good likelihood of timely repayment of short-term obligations with sound short-term liquidity factors. Outlook on the assigned ratings is ‘Stable’. The previous rating action was announced on June 23, 2023.

FORL, the part of Madina Group, was incorporated in 1986, The principal activity of the Company is manufacturing, and sale of vanaspati ghee, cooking oil, spices, water and by products. The Company is selling their brand under the name of ‘Kisan’, ‘Data’, Sartaj’ and ‘Taiba’ all over Pakistan. The total plant power requirement of the Company is 4MW, 1W is meet through K-Electric and 3W from Self Generation through STG. In FY24, the Company has installed solar panels with a power generation capacity of 642 KW for power backup and cost efficiency. Additionally, the Company is expanding its storage capacity in Karachi.

Pakistan's edible oil industry, which depends on imported palm oil and seeds, experienced a decline in imports due to reduced consumer demand caused by higher prices. Domestic prices spiked in FY23 due to expensive inventory held by market players from a year before, however, they have since stabilized and decreased in line with global trends. Nevertheless, inflation pressures have prompted consumers to switch brands.

Topline improved in FY23 on the back of higher prices despite a decline in volumes. Improvement in gross and operating margins was also noted on account of higher end prices in the market that led to inventory gains for the Company. Net margins, however, remained low due to high financial charges and lower share of income from associates. Debt levels increased due to higher working capital requirements, nevertheless, gearing and leverage indicators remain within manageable levels. Maintenance of capitalization profile will remain important. Liquidity and coverage profile remained adequate; however, improvement in the same will be important.
For further information on this ratings announcement, please contact at 021-35311861-64 or email at info@vis.com.pk.

Applicable Rating Criteria:
Industrial Corporates
https://docs.vis.com.pk/docs/CorporateMethodology.pdf
VIS Issue/Issuer Rating Scale
https://docs.vis.com.pk/docs/VISRatingScales.pdf

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 2024 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .