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PACRA Maintains Entity Ratings of Shabbir Feed Mills (Pvt.) Limited

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by May 7, 2018 General

Islamabad, May 07, 2018 (PPI-OT): Among the largest agro based segments in Pakistan, poultry holds a prominent place. In Pakistan, formal feed manufacturing started in early 1960. With 350 poultry feed mills and home mixtures, country annually produces around 10 MMT of poultry feed. This industry directly drives its demand from poultry – chicken and eggs consumption. With growing income levels and expanding population, the demand for poultry stays robust, in terms of poultry feed as well. The industry is experiencing ~10% growth.

The ratings incorporate Shabbir Feeds strong presence in the southern Punjab in its related fields – poultry feeds, birds and eggs. This is underpinned by strong demand dynamics. Company has lately camped up its capacities and is catching on utilization levels. By achieving stability in production and ensuring efficiencies, margins are likely to benefit.

Company is likely to pursue market penetration strategy. It has relatively long working capital cycle due to seasonal nature of inputs that leads to larger holding period, while receivable credit is adequate. Company operates with high leveraging, primarily in the form of short-term borrowings. They are used to fund inventory and advances/financial support to associates. Although, cashflows are adequate, given extended leveraging, coverages are constrained. Strong growth in poultry sector amidst improving macro-economic conditions and increasing population is expected to develop consumer demand.

The ratings are dependent on the management’s ability to build profitable volumes while benefiting from positive demand fundamentals. Financial discipline is crucial; Strengthening of governance framework would be beneficial. The management should consider holding debt driven growth and improving debt mix.

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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