Karachi, July 04, 2022 (PPI-OT):VIS Credit Rating Company Limited (VIS), has reaffirmed entity ratings of ‘A-/A-2’ (A-minus /A-Two) to Kausar Ghee Mills (Pvt.) Limited (KGML). The long-term rating of ‘A-’ signifies good credit quality; protection factors are adequate meanwhile risk factors may vary with possible changes in the economy. The short-term rating of ‘A-2’ signifies good certainty of timely payment with sound liquidity and company fundamentals. Access to capital markets is good along with low risk factors. Outlook on the assigned ratings is ‘Stable’. Ratings were suspended in December’2021 owing to non-availability of audited accounts. Ratings before suspension were announced on September 09, 2020.
The ratings assigned to KGML take into account its association with Kausar Group of Companies, having business stake in various sectors involving edible oils, poultry, feed and rice processing. The geopolitical scenario and slowdown in domestic economic activity amidst the COVID-19 pandemic did not pose any considerable threat to the financial risk profile of the company given its presence in relatively inelastic demand staple food segment. . Ratings shall remain dependent on the company’s ability to maintain scale of operations, continuity of sponsor funds for bridge financing, improvement in margins and containing of leverage indicators around current levels.
The assigned ratings reflect stable business model, increasing equity base and sound liquidity profile. The ratings incorporate steady growth in topline noted on a timeline basis. While Gross margins improved marginally in the outgoing year, the same has remained range-bound over the past three years. Maintenance of margins amidst declining international palm oil prices post lifting of ban on Indonesian exports which classifies as the largest exporter of palm oil in the world remains challenging. Ratings draw comfort from integrated production facility, well established distribution network, brand recognition in the local market and vertical integration with group owned feed mill.
KGML’s conservative capital structure as an outcome of minimal reliance on credit financing coupled with sound coverages is a key rating driver. The sponsors have supported the company with interest free loans to meet working capital requirements. However, the same has declined on a timeline basis. However, the ratings remain sensitive to highly price sensitive import market of raw material and relatively low margins compared to peers. Going forward, gearing and leverage indicators are expected to remain within manageable levels given limited reliance on credit financings.
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
Website: https://www.vis.com.pk/