Press Release

VIS Assigns Initial Entity Ratings to Sunridge Foods (Private) Limited

Lahore, September 10, 2024: VIS Credit Rating Company Limited (VIS) has assigned initial entity ratings of ‘BBB+/A-3’ (Triple B Plus/A-Three) to Sunridge Food (Private) Limited (‘SF’ or ‘the Company’). The medium to long-term rating of ‘BBB+’ denotes adequate credit quality; protection factors are reasonable and sufficient. Risk factors are considered variable if changes occur in the economy. The short-term rating of ‘A-3’ denotes fair likelihood of timely repayment of short-term debt obligations with satisfactory liquidity factors. Risk factors are larger and subject to more variation. Nevertheless, timely payment is expected. Outlook on the assigned rating is ‘Stable’.

SF is a wholly-owned subsidiary of Unity Foods Limited. It primarily engages in the processing of wheat, flour and rice; the major product sales is related to flour. Other products for the Company are sugar, salt, lentils and pulses with a majority of local sales. The Company sells its products under the brand name ‘Sunridge’, directly to retailers, restaurants, hotels and a vast network of distributors spread across the country. SF manages three flour processing facilities and a rice-processing unit in the provinces of Sindh and Punjab. Additionally, SF possesses storage facilities in Punjab, KPK, and Sindh.

Market demand for wheat and flour in Pakistan remains strong due to the country’s heavy reliance on the staple food, however brand competition is present in the middle to high end market where the Company operates. The wheat production for FY24 increased in contrast to the previous flood stricken financial year. The local production is not sufficient to meet the domestic demand hence some quantities are imported to meet the local consumption. This exposes the industry to international market shifts and currency fluctuations, though flour milling companies can pass on price changes to customers, typically with a time lag.

The Company is increasing long-term investments in a wholly owned subsidiary company and a public listed meat exporting company. The company has exhibited growth in sales over the years on the back of both higher volumetric growth and selling price. SF maintains a network of distributors, with prominent clients including institutions utilizing SF's products in their manufacturing processes, along with significant engagements with large-scale retailers. However, Bottom line has remained marginal. Coverages and liquidity have remained volatile. The Company is enhancing storage capacity of silos and production capacity of rice and flour mills. Furthermore, construction of a new warehouse is currently underway and is planned to be completed by the end of FY25. As per management, the planned capex is projected to be financed mainly from internal sources and short-term borrowings. Gearing and leverage have improved on the back of equity injection. With plans to mobilize short-term financing, increase in leverage indicators is projected. The assigned ratings are dependent upon materialization of projected financial targets and liquidity management for timely servicing of obligations.

For further information on this rating announcement, please contact the undersigned at 042-35723411-12 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

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 2024 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .