Press Release

VIS Reaffirms Entity Ratings of JK Dairies (Private) Limited

Lahore, December 22, 2023: VIS Credit Rating Company Limited has reaffirmed the entity ratings of JK Dairies (Private) Limited (JKD) 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 January 4, 2023.
JKD commenced its dairy farming operations in 2007. The ratings assigned to JKD takes into account its affiliation with the JK Group, which has business interests in sugar, agriculture, power and mining. The company's product range encompasses Raw Milk, Whole Milk, Low-Fat Milk, Yogurt, Cream, Hay, and Forage. JKD runs a self-sustaining dairy farm primarily within a business-to-business model.
The demand for milk follows a seasonal pattern, with flush and lean periods occurring in the first and second halves of the year respectively. Despite this, the demand for milk shows low elasticity and remains relatively stable. Factors such as urbanization, an untapped market with significant growth prospects, favorable regulatory policies, and a rising middle class contribute to the increasing demand for packaged milk. Enforcing significant regulatory changes, such as implementing minimum pasteurization laws, could potentially address industry challenges more effectively. VIS is of the opinion that the advantages stemming from marketing initiatives will become evident over the medium to long duration. JKD's exposure to business risk is relatively limited, given its secure contractual agreement with Nestle.
Assessment of financial risk profile take into account considerable growth in topline emanating majorly from higher average product price. Despite the upward trend in net sales gross and net margins suffered on the back of inflated input costs, higher administrative expenses and increased finance cost due to increase in policy rate through the year. Cash flow coverages decreased due to lower operating profits while liquidity ratios exhibited a mixed trend. Gearing and leverage remained at manageable levels. Given the absence of any major capital expenditure in the foreseeable future, the management is projecting gradual reduction in long-term borrowings while short-term borrowings are projected to increase, which may result in slightly lower gearing ratio given equity is expanded as per projections.
For further information on this rating announcement, please contact Mr. Maimoon Rasheed at 042-35723411-12 (8008) or email at

Maimoon Rasheed

Applicable Rating Criteria: Industrial Corporates (May 2023)
VIS Issue/Issuer Rating Scale

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