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)
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