Karachi: VIS Credit Rating Company Limited (VIS) has reaffirmed the entity ratings for Madina (Pvt.) Limited (MPL) at 'BBB/A-2', reflecting adequate credit quality with stable outlook, despite ongoing challenges in the edible oil industry. This rating indicates the company’s capability for timely financial obligations and sound liquidity, amidst a competitive and fluctuating market environment.

According to VIS Credit Rating Company Limited, the stable ratings for MPL acknowledge its solid market position and robust business fundamentals, even as it navigates significant industry risks such as high dependency on imported raw materials and intense market competition. Madina (Pvt.) Limited, a key player under the Madina Group umbrella since 1946, engages in the manufacturing and sales of banaspati ghee, cooking oil, and related products, with a notable production capacity of 125,000 Metric Tons.

The ratings reflect the company's resilience in facing the edible oil sector's challenges, characterized by low value addition, high switching costs, and thin margins. Despite these pressures, MPL managed to sustain its profitability through effective pricing strategies and improved gross margins in 2023, even as it battled high product prices and reduced sales volumes due to costly inventory holdovers amid falling international commodity prices.

The financial analysis shows MPL's increased leverage and gearing in 2023 due to higher working capital needs spurred by slower product offtake. However, the company maintained an adequate liquidity profile, which is crucial for its ongoing operations and financial health. Recovery of sales tax remains a significant factor for liquidity management.

Going forward, MPL's focus will be on maintaining its financial risk profile amidst expected market volatilities with declining prices and continued low offtake. The company's ability to adapt to market changes while sustaining its financial health will be critical in maintaining its credit ratings in the future.