Karachi: VIS Credit Rating Company Ltd. (VIS) has reaffirmed the entity ratings for Asian Food Industries Limited (AFI), maintaining a rating of 'A-/A2' (Single A Minus/A Two). This rating indicates good credit quality and adequate protection factors, with risk factors subject to change based on economic conditions. The outlook remains 'Stable,' following the previous rating action in February 2024.
AFI, operating under the brand name 'Mayfair,' is a family-owned business known for its strong presence in the local confectionery and biscuits market. The company was a pioneer in introducing bubble gum chews and deposited candies in Pakistan. With a distribution network comprising over 450 distributors and sub-distributors across the country, AFI caters to a broad consumer base.
The company's business risk is classified as medium to low, focusing primarily on the middle to upper-middle segment of the population, particularly the younger demographic. The biscuit market is segmented into crackers, savory, and sweet biscuits to align with evolving consumer preferences for healthier options. Similarly, the confectionery market has seen a shift towards premium and artisanal products. Online platforms have facilitated this trend, offering consumers a broader range of choices.
Seasonal spikes in sales during religious festivals, weddings, and school vacations highlight the cultural importance driving consumer demand in the industry. Pricing dynamics in the local food sector, including the biscuit industry, are influenced by the costs of raw materials such as sugar, wheat, and edible oil. Additionally, the reliance on imports for flavors and components underscores the impact of global market forces on the sector's growth.
AFI has shown resilience amid challenging macroeconomic conditions, achieving consistent revenue growth and effectively managing cost pressures. This growth is supported by a robust marketing and distribution network. The company's financial profile shows improved coverage ratios and a stable cash conversion cycle, aided by a business model that emphasizes advance payments for local sales.
Although leverage levels have remained within manageable limits due to healthy cash reserves, the company's gearing is expected to rise with planned long-term debt financing for capacity expansion. Despite this, AFI's overall financial risk profile remains low. The company's ability to sustain profitability and manage expansion-related borrowing will be crucial for maintaining its current ratings.