Press Release

JCR-VIS Reaffirms Entity Ratings of MATCO Foods (Private) Limited

Karachi, April 4, 2017: JCR-VIS Credit Rating Company Limited (JCR-VIS) has reaffirmed entity ratings of MATCO Foods (Private) Limited (MFL) at A-/A-2. Outlook on the assigned ratings is ‘Stable’. Previous rating action was announced on December 28, 2015.

The ratings incorporate MFL’s position as one of the leading rice exporters in the country and efforts at cultivating its brand in the local market. Ratings also incorporate the company’s efforts to diversify revenue base through focus on value added products including organic rice. Moreover, MFL plans to initiate export of rice glucose. Assigned ratings are constrained by current sector dynamics, with weak demand and decline in prices resulting in higher inventory levels for local industry players.

During FY16, MFL’s volumetric growth in basmati exports outperformed the industry. However with falling international prices, the company exhibited a lower revenue base. As a result, margins of the company reduced coupled with higher carrying costs. Consequently, bottom line reported a loss in the outgoing fiscal year. On the back of recovery in international prices, the company reported a positive bottom line in 1H17; management expects this trend to continue for the coming years. Nevertheless, given long holding period of raw materials, MFL remains exposed to inventory loss risk.

With contracted margins, fund flow from operations (FFO) was notably lower in FY16. Declining trend in FFO may need to be closely monitored for impact on debt servicing ability. Company’s ability to sustain gross margins reported in 1H17 is likely to improve cash flows during ongoing fiscal year.

At end-December 2016, gearing of the company remained under 2x on account of augmentation in equity base from profit retention. Currently, MFL is in process of raising equity by transitioning to a public listed entity. This may lead to improvement in capitalization indicators. With borrowings primarily short term in nature and the company carrying a sizeable amount of saleable inventory, its ability to retire debt in a timely manner is considered adequate.

For further information on this rating announcement, please contact Mr. Javed Callea (Ext: 201) or the undersigned (Ext: 207) at 021-35311861-70 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 2017 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