Karachi, The Pakistan Credit Rating Agency Limited (PACRA) has maintained its entity ratings for Qadir Agro Industries (Pvt.) Limited, reflecting the company's evolving presence in Pakistan's edible oil and poultry feed sectors. This announcement comes amidst significant challenges in the edible oil industry, primarily due to high dependency on imports, which constitutes around 80% of the production cost, making it one of the highest imported commodities in Pakistan.
According to The Pakistan Credit Rating Agency Limited, the edible oil industry faces considerable price volatility and currency depreciation risks. Despite these challenges, Qadir Agro Industries has shown resilience, marked by an increase in net sales to PKR 5.6 billion in FY23 from PKR 4.1 billion in FY22, attributed to price increases. However, the company's profit margins have been squeezed due to rising input costs, with net income declining to PKR 6 million in FY23 from PKR 24 million in FY22, and gross profit margin reducing slightly from 4.6% in FY22 to 4.1% in FY23.
The edible oil industry's future outlook remains tentative, contingent on the removal of the Genetically Engineered (GE) import ban by the third quarter of FY23. With this potential change, total oilseed imports are forecasted to reach 2.6 million tons in FY24, marking a 71% increase from FY23 estimates. This shift is expected to impact the industry significantly, coupled with a projected increase in total oilseed production to 2.9 million tons in FY24.
Qadir Agro Industries has also focused on expanding its operations, notably enhancing its poultry feed capacity from 15MT to 30MT per hour. This strategic move aims to diversify its market presence and stabilize its financial performance amid the industry's fluctuating dynamics. Despite the financial strains, the company has managed to improve its average inventory days to 62 in FY23 from 79 in FY22, indicating better inventory management.
The ratings underscore the importance of management's ability to navigate the challenging environment by improving margins, profitability, and overall financial health. The PACRA ratings are contingent on the company's continued focus on strengthening governance practices and mitigating financial risks, especially those related to currency fluctuations given its heavy reliance on oilseed imports.
The continued rating by PACRA signals cautious optimism for Qadir Agro Industries' adaptability and strategic planning in facing the inherent challenges of the edible oil sector in Pakistan.