Press Release
VIS Reaffirms Entity Ratings of Golden Harvest Foods (Private) Limited
Karachi, November 14, 2024: VIS Credit Rating Company Limited (VIS) has reaffirmed entity ratings of Golden Harvest Foods (Private) Limited (GHFL) at ‘BBB+/A2’ (Triple B Plus/A Two). Medium to long-term entity rating of ‘BBB+ reflects adequate credit quality; Protection factors are reasonable and sufficient. Risk factors are considered variable if changes occur in the economy. Short Term Rating of ‘A2’ indicates good likelihood of timely repayment of short-term obligations with sound short-term liquidity factors. Outlook on the assigned ratings is ‘Stable’. Previous rating action was announced on December 8, 2023.
GHFL, a private limited company, is a manufacturer and trader of bakery products and frozen ready-to-eat meals. The Company produces and distributes its products under the renowned name ‘Dawn Bread’ through an Authorized User License agreement and joint ownership by the shareholders and directors of GHFL in the brand company, Ghulam & Fida Brothers (Private) Limited, which holds the rights to ‘Dawn Bread’. However, its operations are currently limited to the Karachi and Balochistan regions within domestic market. Two production facilities are located in Karachi and GHFL maintains an in-house distribution network which enables it to efficiently serve its domestic clients. Moreover, the Company has a diversified market presence across the Middle East, America, Asia, Europe and Oceania.
The assigned ratings incorporate the bread industry’s steady growth, driven by increasing demand for packages and branded bread, fueled by urbanization, busier lifestyles and a rising focus on hygiene. The convenience and longer shelf life of packaged bread are also boosting demand from restaurants and street vendors. However, the industry faces significant cost pressures, particularly due to volatile raw material prices, including a 32% rise in flour costs, a 39% increase in sugar prices, from March 2023 to March 2024, and gas shortages. Despite these challenges, the demand for bread is expected to continue growing, with manufacturers needing to manage cost pressures and evolving consumer preferences to remain profitable.
The rating reflects GHFL’s strong revenue growth, primarily driven by increased export sales and an improvement in local sales. Despite the rising raw material costs, the Company has maintained stable gross and operating margins. However, the decline in net profit was largely due to increased taxation and finance cost.
GHFL’s liquidity and cashflow coverage improved, driven by reduced debt and enhanced operational efficiency. The debt service coverage ratio showed a modest increase, while a slight rise in equity, primarily from retained profits, strengthened its financial position. The reduction in debt led to improvements in gearing and leverage ratios. Moving forward, maintaining stable margins, cash flow and debt coverage will remain important from the ratings perspective.
For further information on this rating announcement, please contact at (021) 35311861-4 or email at info@vis.com.pk.
Applicable Rating Criteria: 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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