Karachi, January 26, 2022 (PPI-OT):VIS Credit Rating Company Limited (VIS) has assigned initial entity ratings of ‘BBB/A-2’ (Triple B/A-Two) to National Sea Foods (Private) Limited. The medium to long-term rating of ‘BBB’ reflects adequate credit quality; protection factors are reasonable and sufficient. Short-term rating of ‘A-2’ indicates good certainty of timely payment, liquidity factors and company fundamentals are sound and access to capital markets is good. Outlook on the assigned ratings is ‘Stable’.
National Sea Foods (NSF) specializes in processing and export of fresh and frozen seafood products including Shrimps (which is the flagship product), Squids and Mix Fishes. NSF has an estimated market share of ~3-4% (in terms of overall seafood exports). Shareholding of the company is vested among four members of Vohra Family. The annual installed processing capacity stands at ~4,000 MTons with cold storage capacity of 800 MTons reported to be sufficient for current level of operations. The management has expressed interest in increasing overall production capacity and hiring of additional workforce in the medium term.
Assigned ratings incorporate consistent topline growth, adequate profitability margins and sound cash flow coverage indicators given modest scale of operations of the company. The ratings are constrained by high business risk given presence in perishable commodity business with limited capitalization levels. Nevertheless, comfort is drawn from the company’s ability to maintain high product quality as three-fourth of raw material is procured from day caught which is facilitated through adequate storage facility and access to working capital financing.
As per management, higher shelf life and post-season product availability particularly for shrimps facilitates the company in fetching better margins, relative to peers. Room for improvement exists in terms of formalization of governance framework with induction of independent directors and establishment of board level committees. Strengthening of policy and procedural framework and setting up a formalized internal audit function is also considered important. Going forward, worldwide continuation of Covid-19 with emerging new variants (such as Omicron) and uncertainty of its impact on overall economy and political environment are the key present business risk factors.
The export markets comprise five countries including China, UAE, Japan, Thailand and Vietnam. Client wise sales concentration draws comfort from long-term association of around 8 to 10 years. The management expects healthy growth in earning profile given planned addition of new products (including Octopus and Scuttle Fish) in the ongoing fiscal year. In view of growth strategy, the management plans to enhance credit limit of a running finance line. Owing to same, leverage indicators may trend upwards; however, the same are expected to remain within manageable levels for the assigned ratings on account of projected improvement in equity base.
For more information, contact:
Director Compliance and Rating Analytics,
VIS Credit Rating Company Limited
VIS House, 128/C, 25th Lane off Khayaban-e-Ittehad,
Phase VII, DHA, Karachi, Pakistan
Tel: +92-21-35311861-72
Fax: +92-21-35311873
Email: bilal@jcrvis.com.pk
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