Lahore, September 15, 2021 (PPI-OT):Poultry industry is one of the largest agro based segment in Pakistan, comprising domestic and commercial poultry. The industry has posted an annual growth of ~ 10%-12% lately. Pakistan is sufficient in poultry meat and egg production. However, per capita protein consumption remains low when compared to the world’s average. The industry generates an estimated annual revenue of ~ PKR 1,082bln from local and export sales. Due to Covid-19 outbreak, marriage halls/restaurants were closed.
This, along with no exports of poultry products, led to supply glut in local market. Prices of poultry products, especially day-old chicks, posted a dip despite being an essential food item due to lower demand with many poultry farms becoming non-operational. Demand, and hence, prices have recovered lately, easing down the liquidity problems of the industry. Moreover, SBP measures have provided respite. As business avenues became operational, demand for poultry products has improved.
The ratings reflect Sadiq Poultry (Pvt.) Ltd.’s (‘Sadiq Poultry” or “the Company’) association with an established and vertically integrated poultry Group, Sadiq Group. The Company has an established profile in poultry industry and is a leader in broiler, chicken, eggs and day old chicks segment. Post Dr. Sadiq’s demise, the transition of shareholding and division of roles of new sponsors have been completed successfully. The Company’s topline surged and remains concentrated towards day old chicks and eggs sale. Initially, the Covid-19 breakout impacted the entire industry adversely, especially prices of day old chicks, affecting the Company’s business profile.
However, better volumes and stable prices of Eggs and day old chicks were achieved, as the countrywide reopening of restaurants and marriage halls improved the demand. Margins improved significantly, and the Company posted healthy profits in 3QFY21. Financial risk profile of the Company is characterized by moderate leverage and strong coverage ratios. The loan mix is skewed towards short term borrowings to fulfil the working capital requirements. Further, lower interest cost due to cumulative policy rate cuts has decreased the debt servicing burden. However, going forward, the optimum production and sales levels are anticipated if demand avenues (banquet halls, dine-in restaurants) remain operational and demand uncertainties subside. The ratings incorporate potential support from sponsors and/or Group companies.
The ratings are dependent on the management’s ability to prudently manage business risk for perishable consumer products, while sustaining business margins in prevailing uncertain economic conditions. Going forward, consistently generating sustainable operational cashflows is important.
For more information, contact:
Analyst,
The Pakistan Credit Rating Agency Limited (PACRA)
Awami Complex, FB1, Usman Block New Garden Town,
Lahore, Pakistan
Tel: +92-42-5869504-6
Fax: +92-42-5830425
Email: hammad.rashid@pacra.com
Website: www.pacra.com