Press Release

JCR-VIS Reaffirms Rating of the Sukuk Issue of Engro Foods Limited at A+

Karachi, December 30, 2016: JCR-VIS Credit Rating Company Limited (JCR-VIS) has reaffirmed the rating of the Sukuk issue of Rs. 950m of Engro Foods Limited (EFL) at ‘A+’ (Single A Plus). Outlook on the assigned rating is ‘Stable.’ The previous rating action was announced on December 14, 2015.

EFL is primarily engaged in manufacturing, processing and selling of dairy products & beverages which represent around 90% of its sales revenue; the company also sells ice cream and operates a dairy farm. During 9M16, net sales of EFL declined largely due to reduced turnover in dairy & beverages segment while gross margin was largely maintained around prior year’s level. Despite the decline in sales, a lower expense base allowed EFL to maintain its bottom line and improve its net margin during 9M16.

On a timeline basis, the company has trended towards adopting a more conservative capital structure as evidenced by notable balance sheet deleveraging. In view of lower overall size of debt and growth in equity base by way of profit retention, leverage indicators showcased decline. Notable improvement in internal cash generation, as demonstrated by continued increase in funds from operations has augmented the company’s ability to meet debt servicing payments.

EFL issued a Sukuk in July 2009 amounting to Rs. 950.00m with a tenor of 8 years. The first principal repayment was completed in July 2015 (Rs. 71.25m) while two payments were made in CY16 (accumulating to Rs. 475.00m). The Sukuk is expected to mature in January 2017 with final repayment amounting to Rs. 403.75m.

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

Jamal Abbas Zaidi

Applicable Rating Criteria: Industrial Corporates (May 2016)

Rating the Issue (June 2016)

Information herein was obtained from sources believed to be accurate and reliable; however, VIS Credit Rating Company Limited 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.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.VIS is not an NRSRO and its credit ratings are not NRSRO credit ratings.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 VIS Credit Rating Company Limited. All rights reserved. Contents may be used by news media with credit to VIS.

JCR-VIS Credit Rating Company Limited