Press Release

VIS Reaffirms Entity Ratings of Golden Harvest Foods (Private) Limited

Karachi, November 28, 2022: VIS Credit Rating Company Limited has assigned an initial entity ratings of Golden Harvest Foods (Private) Limited at ‘BBB+/A-2’ (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 ‘A-2’ 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 October 25, 2021.

Incorporated in 2000, GHFL a private limited company, is principally involved in the business of manufacturing and sale of bakery products and ready to eat frozen meals. GHFL is authorized to produce and distribute product suite of bakery products and ready to eat frozen meals under the brand name of ‘Dawn Bread’, Mezban and Cake Shake, in the jurisdiction of Karachi and Baluchistan (domestically) and under the brand name of ‘Dawn Bread’ and Mezban internationally.

The assigned rating incorporates the strong market positioning of the ‘Dawn Bread’ brand, a market leader in the bread products industry in Pakistan. The brand’s long operational history and broad product suite are viewed as rating strengths. Provision of consistent quality products and fleet size of 200+ vehicles for distribution across Karachi provides competitive advantage to the company against other competitors. Furthermore, the Company has a sizable export clientele, which contribute about half of the Company’s topline. Although country-wise concentration is on the higher side towards Saudi Arabia and USA with both these countries accounting for three-fourth of export revenue; management plans to further diversify geographic presence. The Company operates in the Consumer – FMCG segment, which VIS classifies as Medium risk, being characterized by low cyclicality, high to medium competition and low energy sensitivity.

Assessment of financial risk profile take into account consistent growth in topline with shift noted towards local sales in the outgoing year amidst challenging export environment. Net profit margins reduced in the review period due to higher input costs, finance charges and tax expenses. With decline in profit levels, liquidity profile of the company also weakened; however some support is garnered from manageable working capital cycle. A review of the aging of trade debts is indicative of sound credit quality. With increased debt mobilization to finance machinery additions across the value chain and meeting extended working capital needs; leverage levels of the company trended upwards. Assigned ratings remain sensitive to projected improvement in margins, cash flow coverages of outstanding obligations, coverage of short-term debt through stock-in-trade and inventory, and leverage levels.

Ratings are constrained by room for improvement in the corporate governance framework which reflects GHFLs operational status as a family-owned unlisted entity.

For further information on this rating announcement, please contact the undersigned (Ext: 201) or Asfia Aziz (Ext: 213) at 021-35311861-71 or fax to 021-35311872-3.

Javed Callea

VIS Entity Rating Criteria: Corporates (August 2021)

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