Karachi: VIS Credit Rating Company Limited (VIS) has reaffirmed its ratings for Muller and Phipps Pakistan Private Limited at ‘A+/A-1’ for long-term and short-term entity assessments respectively. The ratings reflect strong credit quality and liquidity, with a stable outlook for the future. The previous rating action was announced over a year ago on June 14, 2023.
According to VIS Credit Rating Company Limited, Muller and Phipps Pakistan, known for its extensive history in the logistics and distribution sector, continues to play a pivotal role in the industry. The company is recognized as a leading distributor nationwide, providing a range of services including cold chain warehousing, sales, marketing, and after-sales support. The ratings benefit from the company’s diverse client base and long-standing relationships with top-tier corporations, particularly in the pharmaceutical sector which forms a significant part of its revenue.
The report notes that while the distribution industry is highly competitive and fragmented, leading to lower margins and limited pricing power, Muller and Phipps is expected to see revenue growth from both the expansion of its existing business portfolio and the addition of new business partners. The company has reported a 19.1% growth in sales in calendar year 2023, driven by increased sales volumes, new business acquisitions, and successful renegotiations of margins, resulting in a gross margin increase to 7.1% for the period. However, net margins remain pressured at 0.3% for fiscal year 2023 due to external factors such as rising interest rates and increased taxation.
The assessment also considers the company’s financial risk profile, highlighting a slight increase in its equity base through profit retention and a rise in debt levels due to higher short-term borrowings necessary for supporting growth in business volumes. Despite a higher gearing ratio of 2.4x as of the end of December 2023, the company maintains a satisfactory liquidity position with a current ratio of 1.1x. Looking forward, improving the company’s cash flow coverage profile will be crucial.