Karachi: VIS Credit Rating Company Limited has reaffirmed the entity ratings of Dairyland (Pvt) Limited at 'A-/A2'. The medium to long-term rating of 'A-' indicates good credit quality with adequate protection factors, while the short-term rating of 'A2' reflects a good likelihood of timely repayment of short-term obligations. The outlook on the rating remains 'Positive', highlighting the company's stable financial position. The previous rating action was announced on November 17, 2023.

According to a statement by VIS Credit Rating Company Limited, Dairyland, founded in 2009, focuses on the production and distribution of dairy products, prominently processed milk. The company is part of the Akhtar Group of Companies, with Akhtar Textile (Pvt.) Limited holding a 49% share. Dairyland operates facilities located in Gharo, District Thatta, and Karachi.

The packaged milk sector in Pakistan is marked by intense competition, capturing only 10% of the total milk market due to consumer preference for traditional loose milk and regulatory challenges. Despite these hurdles, the sector sees potential growth, although rising industry risks, such as taxes and inflation, pose challenges to demand.

In fiscal year 2024, Dairyland showed robust growth in both liquid and non-liquid product lines by expanding its milking herd to meet market demands. The company plans to increase its export sales and domestic market presence. Despite an increase in net sales driven by favorable pricing and higher volumes, profitability declined due to rising input costs and financial charges. The positive ratings outlook is supported by improved debt servicing.

Future upgrades in ratings depend on restoring profit margins to historical levels, enhancing debt servicing metrics, maintaining adequate liquidity, and preserving a conservative capital structure.