PACRA Upgrades Entity Ratings of Mumtaz Feed Mills (Private) Limited

Lahore, November 12, 2019 (PPI-OT): The global feed industry is valued at ~ $460bln, with poultry (~$166bln) constituting ~36% of the total industry. Pakistan produces ~8mln MT of feed annually with a total of ~150 registered feed mills, and ~200 unregistered feed mills catering to it.

The ratings reflect Mumtaz Feed Mills (Pvt.) Limited’s (Mumtaz Feed) developing business profile in the Poultry Feed Industry. Two years ago, the Company entered the feed business by manufacturing and selling Broiler and Layer Feed. The Company has a relatively small top-line and lower margins when compared to its peers. Utilization level remains low, though, have improved on timeline basis. The Company remains exposed to inherent risks in the feed industry emanating from raw material price changes and disease risk in poultry farms.

The Company’s working capital remains in check on account of procuring raw materials on cash and prudent debtor management. The Company enjoys synergies as it procures raw material (mainly soybean meal) from associated concern. Mumtaz Feed financial profile is characterized by an aggressively leveraged capital structure. Financial support from Sponsors, in the form of loan, provides comfort to the ratings. The leveraging may rise in future in line with expanding operations. Going forward, additional debt and rising interest rate scenario may exert pressure on the Company’s cashflows and coverage ratios. During the year, the Company changed its Auditor (SBP Panel ‘B’ auditor appointed) and strengthened its control mechanism.

The ratings are dependent on the management’s ability to gain market share, improve margins, and, in-turn, profitability. Maintaining strict working capital discipline and maintaining adequate leveraging remain critical. Any significant deterioration in margins and/or coverage’s will have negative impact on the ratings.

For more information, contact:
Analyst
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
Email: hammad.rashid@pacra.com
Web: www.pacra.com

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