Press Release

VIS Maintains Entity Ratings of Garibsons (Pvt.) Ltd.

Karachi, February 23, 2022: VIS Credit Rating Company Ltd. (VIS) has maintained entity ratings of ‘A-/A-2’ (Single A minus/Single A-Two) to Garibsons (Pvt.) Ltd. (GSPL). Outlook on the assigned ratings has been revised to ‘Stable’. The long-term rating of ‘A-’ signifies good credit quality with adequate protection factors. Risk factors may vary with possible changes in the economy. Short Term Rating of ‘A-2’ indicates good certainty of timely payment, sound liquidity factors supported by good fundamental protection factors and small risk factors. Previous rating action of A-/A-2 with Positive outlook was announced on March 11, 2021.

Incorporated in 1976, GSPL is engaged in the business of processing, export of Rice, Rice Bran, Rice Husk, Wheat, Maize and manufacturing of raw and laminated Chipboard and Medium Density Fibreboard (MDF). Although GSPL is primarily an export-oriented company as approximately four-fifth of the company’s revenue is generated through exports. The company also has a presence in the local market through its ‘Mughal’ brand. The company’s processing and storage facilities are based in Sindh (Karachi, Gharo, Jacobabad and Golarchi) and Punjab (Sheikhupura, Pindi Das, Layyah and Chaubara). GSPL is a family-owned organization with shareholding vested with members of the Garib family, who also participate in the management and supervision of company’s operations.

Ratings take into account sizeable market share of GSPL in overall rice exports of Pakistan. Despite fragmented nature of the industry, GSPL’s market share in volumetric terms in overall Pakistan’s rice exports was reported at 10% (FY20: 9%; FY19: 11%) in FY21. Business risk is considered moderate in view of significant competition and volatility in prices due to demand supply dynamics; however, growing worldwide population supports demand of rice in the long-run.

Assessment of financial risk profile incorporates improving topline and relative stability in gross margins. Strong topline growth in FY21 was led by higher volumes further supported by currency devaluation. Sales mix depicts increased focus on local market which has contributed towards margin sustainability. Gross margins, however, remained under pressure primarily due to significant increase in freight charges along with higher manufacturing costs including energy. Nevertheless, the decline in margins was marginal relative to peers. Together, higher revenues and sustained margins contributed towards higher profitability of the Company. In line, liquidity profile improved during FY21 reflecting adequate cash flow coverage, manageable ageing of trade debts and sound debt servicing. However, capitalization indicators remain on the higher side. While debt primarily constitutes of short term loans for working capital purposes, the Company remains exposed to commodity price risk and exchange rate volatility. Going forward, maintaining topline growth, improvement in margins along with deleveraging of balance sheet on the back of higher profitability and profit retention will be important for ratings.

For further information on this rating announcement, please contact Ms. Asfia Aziz or the undersigned (Ext: 306) at (021) 35311861-66 or email at info@vis.com.pk.





Faryal Faheem
Deputy CEO

Applicable Rating Criteria: Industrial Corporates (August 2021)
https://docs.vis.com.pk/docs/CorporateMethodology202108.pdf

Information herein was obtained from sources believed to be accurate and reliable; however, VIS Credit Rating Company Limited (VIS) does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information.VIS , the analysts involved in the rating process and members of its rating committee do not have any conflict of interest relating to the rating(s)/ranking(s) mentioned in this report.VIS is paid a fee for most rating assignments. This rating/ranking is an opinion and is not a recommendation to buy or sell any securities. Copyright 2022 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .