PACRA Assigns Initial Entity Ratings of Tahir Omer Industries Limited

Lahore, December 29, 2017 (PPI-OT):The ratings reflect TOIL’s adequate business profile. Volumetric growth in sales, on the back of recent capacity expansion. Overall gross margins squeezed mainly due to process in-efficiencies, resulting in high cost of production. However, margins are expected to improve in near future, once expansion in enhancing capacities will get streamlined, hence consolidating volumes. Lean inventory management system and related efficiencies continued to remain the competitive edge. Increased topline on account of bulk oil sale as well as management’s focus on the front end sale through establishing their brand in the market would enhance the future prospects.

However, being a largest importer of seeds (Canaola, soyabean) in Pakistan, there is an inherent risk involved of currency fluctuations and prices of raw material, which would lead to deteriorating margins if not capped. The financial risk profile of the company is characterized by moderate leveraging. However, TOIL’s management is committed to reduce their reliance on short-term borrowings, thus resulting in reduced debt levels in next two to three years.

The ratings are dependent on the management’s ability to prudently mange the liquidity and debt profile of the company, particularly working capital, while sustaining business margins. However, comfort is drawn from the company’s commitment to not involve in trading of commodities. Envisaged improvement in business and financial profile along with effective changes in governance framework would be rating positive.

For more information, contact:
The Pakistan Credit Rating Agency Limited (PACRA)
Awami Complex, FB1, Usman Block New Garden Town,
Lahore – Pakistan
Tel: +9242 586 9504 -6
Fax: +9242 583 0425

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