Press Release

VIS Upgrades Entity Ratings of Everfresh Farms (Private) Limited

Karachi, August 02, 2024: VIS Credit Ratings Company Ltd. (VIS) has upgraded entity ratings of Everfresh Farms (Private) Limited (‘EFPL’ or ‘the Company’) to A-/A-2 (‘Single A minus/A-Two’) from BBB+/A-2 (‘Triple B plus/A-Two). Medium to long Term Rating of ‘A-’ reflects good credit quality; Protection factors are adequate. Risk factors may vary with possible changes in the economy. Short Term Rating of ‘A-2’ signifies 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 September 6, 2023.

EFPL was established as a private limited company, initiating its dairy farming activities in 2008. The primary operational focus of the Company involves managing a dairy farm dedicated to the production of milk and agricultural goods. EFPL is affiliated with the Shafi Group of Companies, a conglomerate that operates in various sectors including textiles (Shafi Texcel Limited-STL), food (Everfresh Farms-EFPL, Shafi Foods - SFPL, Shafi Gluco Chem Private Limited), leather (Shafi Tanneries Private Limited), and footwear. EFPL operates as a family-owned entity and is headquartered along with its dairy farm in Lahore, Pakistan.

Assigned ratings consider the business risk profile of Pakistan's packaged milk industry as medium, characterized by non-cyclical sales with seasonal milk production, and high competition with significant untapped growth potential. The industry faces intense competition, but a significant growth opportunity exists in the untapped loose milk market. The shift towards packaged milk, driven by increasing consumer awareness regarding food quality, supports demand stability. However, the recent increase in sales tax poses a challenge for further market penetration in the sector.

Assigned ratings also consider the company's financial profiles. The profitability profile shows growth supported by higher sales volumes and price increases, with margins recovering in 9MFY24 following contraction in FY23 due to increased fodder costs. The capitalization profile benefits from low debt, resulting in sound gearing and leverage metrics. The liquidity profile has improved, with the current ratio reaching healthy levels. Corresponding with profitability, the coverage profile has also recovered to healthy levels after experiencing constraints in FY23, with a high debt service coverage ratio in 9MFY24, while short-term debt coverage remains strong.

Upgrade is on account of consolidation of EFPL’s financial risk profile to be commensurate with assigned ratings. Going forward, key business and financial risk indicators include the industry's ability to manage competition, consumer preferences, and the effects of recent tax increases on pricing. The commitment of major clients like Nestlé supports the stability of sales volumes, but ongoing management efforts are necessary to address challenges and maintain financial ratios. The dependency on continued client relationships and improvement in certain financial metrics will impact future ratings.

For further information on this ratings announcement, please contact 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

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