LAHORE: Al-Khair Rice Mills (Pvt.) Limited has retained its BBB long-term and A2 short-term entity ratings, with a stable outlook, according to the Pakistan Credit Rating Agency (PACRA). This decision underscores the company's strategic alliances and its diverse business ventures, which collectively enhance its market standing and operational robustness.
According to a statement by The Pakistan Credit Rating Agency Limited, Al-Khair Rice Mills benefits from its association with key players in the oil marketing and distribution sector, such as Gas and Oil Petroleum, partly owned by Saudi Aramco, and Sitara Petroleum, which provides logistics for Go Petroleum across Pakistan. These partnerships bolster the group's position in the market. Furthermore, the group diversifies its portfolio through real estate investments and agricultural ventures, including rice cultivation, poultry, and cattle farming.
The rice sector, a notable contributor to Pakistan's agricultural economy, experienced a significant production increase of 35% in the last fiscal year. This surge was fueled by India's temporary export restrictions and growing global demand, pushing basmati exports from $650 million to $876 million. Al-Khair Rice Mills, marketing under the 'Go Grains' brand, capitalized on this growth, achieving a 12% increase in its top line, driven mainly by domestic sales.
Despite facing challenges with export constraints due to working capital issues, the company has expanded its production capacity from 10MT/hr to 30MT/hr, optimizing its operations to improve its standing in the rice market. The acquisition by Aramco has led to a focus on the rice segment, enhancing operational efficiency and profit margins.
The company's transition to a solar energy system has cut energy costs, and increased automation is expected to reduce labor expenses. Al-Khair Rice Mills maintains a low-leveraged capital structure, reflecting prudent financial management and reduced short-term borrowings. The ratings consider the sponsors' extensive experience and commitment to growth, reinforcing a positive operational outlook.
PACRA notes that the company's future ratings will depend on the management's ability to enhance revenue streams and manage expansion prudently. Any significant decline in financial coverages or margins could impact the ratings negatively.