Press Release

VIS Upgrades Entity Ratings of The Organic Meat Company Limited

Karachi, July 02, 2024: VIS Credit Rating Company Limited (VIS) has upgraded the entity ratings of The Organic Meat Company Limited (TOMCL or “the Company”) from ‘A-/A-2’ (Single A Minus/A-Two) to ‘A/A-1’ (Single A/A-One). The medium to long-term rating of ‘A’ signifies good credit quality; protection factors are adequate. Risk factors may vary with possible changes in the economy. The short-term rating of ‘A-1’ reflects high certainty of timely payment; liquidity factors are excellent and supported by good fundamental protection factors. Risk factors are minor. Outlook on the assigned rating is ‘Stable’. Previous rating action was announced on December 15, 2022.

The ratings are underpinned by TOMCL’s market positioning amongst the largest processors and leading exporters of red meat, and the only offal processor in the formal meat sector. It has the largest capacity from slaughtering to packaging, largest fattening farm integrated operations, highest halal meat exports receipts, and access to 16 export jurisdictions. The company deals in processed beef, mutton & camel meat in various forms including fresh-chilled, vacuum-packed, M.A.P vacuum-packed & heat-treated meat and meat byproducts. TOMCL has also ventured into pet chews and cooked meat products, with plans to make these the market leading products. TOMCL has a lean business model that minimizes wastage by exporting byproducts from the internal organs and entrails of the butchered animals.

The business risk profile of the company incorporates price variations prevalent in the food and allied segment due to seasonal impacts in the local market coupled with high geographical concentration in UAE. Meanwhile, the ratings incorporate the Company’s expansion plans regarding chilling and freezing units, and efforts to enhance the company's footprint in the international markets, aligned with its growth prospects. Due to regulatory changes and unavailability of land in the Karachi Export Processing Zone, IPO funds originally allocated for constructing an offal processing facility were redirected to acquire a 100% stake in Muhammad Saeed Muhammad Hussain Limited (MSMHL). This strategic acquisition strengthens the company's value-added product offerings, as MSMHL is licensed to process and export sheep casing to the EU and animal offal, supporting diversification in both emerging and developed markets.

The revenue enhanced on a timeline basis mainly due to inflationary pressure on product prices. Net margins declined lately as exchange gains subsided subsequent to stabilization of rupee against major foreign currency, though profitability remained adequate. Coverages have remained strong along with sound liquidity profile. Gearing and leverage indicators remained low; the growth is projected to be funded through internal cash generation. The ratings remain sensitive to timely attainment of business expansion plan while maintaining 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


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

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