Karachi, May 14, 2019 (PPI-OT): VIS Credit Rating Company Limited (VIS) has assigned the initial entity ratings to Hilal Foods (Private) Limited (Hilal) at ‘A/A-2’ (Single A /A – Two). The long term rating signifies good credit quality with adequate protection factors. Risk factors are considered variable if changes occur in the economy. Short term rating of ‘A-2’ depicts good certainty of timely payment. Liquidity factors and company fundamentals are sound with good access to capital markets. Risk factors are small. Outlook on the assigned ratings is ‘Stable’.
The ratings assigned to Hilal takes into account the company’s moderate business risk profile given its presence in fast moving consumer goods industry and competitive pricing leading to sustained profitability. The assigned ratings are also underpinned by positive demand dynamics of the confectionary industry and established brand equity. Similar to other private limited companies, governance, internal controls and policy framework depict room for improvement.
Top line of the company depicts an increasing trend, on a timeline basis, and has primarily been a function of volumetric growth. Going forward, Hilal expects positive momentum in earnings as a result of increase in production capacity and widened product array. The company has undergone capital expenditure activities to increase the production capacity during the period under review. Gross margins of the company also depicted an improving trend.
Current ratings of Hilal factor in moderate financial risk of the company as depicted by its leveraged capital structure. Debt profile comprises both short term and long term debt along with an off-balance sheet liability in the form of Ijarah financing; this has been mobilized in lieu of the expansion plan. While moderate debt repayments are due in the coming years, cash coverages are expected to remain adequate. Given that management has no plans for major capital expenditure in the near future, leverage indicators are projected to remain within manageable limits. Ratings will be contingent on maintenance of sustainable performance metrics and adequate leverage indicators.
For more information, contact:
Director Compliance and Rating Analytics,
VIS Credit Rating Company Limited
VIS House, 128/C, 25th Lane off Khayaban-e-Ittehad,
Phase VII, DHA, Karachi, Pakistan