Karachi: VIS Credit Rating Company Limited has reaffirmed the entity ratings of Faisalabad Oil Refinery (Pvt.) Limited (FORL) at ‘A-/A-2’, indicating a stable outlook for both long-term and short-term financial obligations. The ratings reflect the company’s good credit quality and capacity for timely repayment, amidst a challenging economic environment for the edible oil industry.

According to VIS Credit Rating Company Limited, the reaffirmed ratings consider the economic conditions that may affect FORL, part of the Madina Group and a key player in the manufacturing and sale of vanaspati ghee, cooking oil, and other related products. The company has managed to sustain its operations despite the industry’s fluctuating dynamics, particularly with imported palm oil and seeds which saw a decline in consumer demand due to high prices.

FORL has sought to enhance its operational efficiency and cost-effectiveness by installing a solar panel system with a capacity of 642 KW and expanding its storage facilities in Karachi. These initiatives are part of the company’s strategy to mitigate the effects of high inventory costs and fluctuating market prices that impacted the industry in FY23.

The report highlights that while FORL experienced a topline improvement due to higher product prices, overall volumes declined. Nonetheless, the company saw an increase in gross and operating margins thanks to beneficial inventory gains. However, net margins were suppressed by high financial charges and a lower share of income from associates.

Despite increased debt levels driven by higher working capital needs, FORL’s gearing and leverage remain manageable. The company’s liquidity and coverage profiles, although adequate, will require improvement to support ongoing and future financial stability.