Press Release

JCR-VIS Reaffirms Ratings of National Foods Ltd at AA-/A-1

Karachi, December 9, 2016: JCR-VIS Credit Rating Company Limited (JCR-VIS) has reaffirmed the entity ratings of National Foods Limited (NFL) at ‘AA-/A-1’ (Double A Minus/ A-One). Outlook on the assigned rating is ‘Stable’. The previous rating action was announced on March 20, 2015.

The assigned ratings incorporate the company’s robust franchise value in the country illustrated by its sizeable market share and brand equity for majority of its products. Moreover, ratings also encompass presence of sound corporate governance framework reflected by an adequate board composition and oversight, presence of a stable and professional management team and implementation of strong internal controls.

Growth in revenue base was largely a function of volumes during FY16. During the outgoing year, the company adopted a volumetric oriented growth strategy under which prices of several products were reduced. As a result, overall margins of the company were reported lower in FY16. Moreover, exports sales also declined on account of a lag caused by change of international distributors. Going forward, domestic and international markets will remain a key focus of the management with organic growth accounting for majority of sales in the near future.

Currently, capital structure of the company remains conservative on account of low debt levels. During FY16, leverage indicators of the company trended upwards with higher utilization of short term borrowings and lower equity on account of a sizeable dividend payout. However, the same improved in Q1’17 on the back of lower short term borrowings utilized. Given the future growth plans of the management, leverage indicators may trend upwards. However, the management intends to maintain the same within prudent limits.

For further information on this rating announcement, please contact Mr. Javed Callea (Ext: 201) or the undersigned (Ext: 207) at 021-35311861-70 (10 lines) or fax to 021-35311873.

Jamal Abbas Zaidi

Applicable Rating Criteria: Industrial Corporates (May 2016)

Information herein was obtained from sources believed to be accurate and reliable; however, JCR-VIS Credit Rating Company Limited (JCR-VIS) does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. JCR-VIS, the analysts involved in the rating process and members of its rating committee do not have any conflict of interest relating to the rating(s)/ranking(s) mentioned in this report. JCR-VIS is not an NRSRO and its credit ratings are not NRSRO credit ratings. JCR-VIS is paid a fee for most rating assignments. This rating/ranking is an opinion and is not a recommendation to buy or sell any securities. Copyright 2016 JCR-VIS Credit Rating Company Limited. All rights reserved. Contents may be used by news media with credit to JCR-VIS.

JCR-VIS Credit Rating Company Limited