Press Release

JCR-VIS Reaffirms Entity Ratings of Matco Foods Limited at A-/A-2

Karachi, January 1, 2018: JCR-VIS Credit Rating Company Limited (JCR-VIS) has reaffirmed the entity ratings of Matco Foods Limited (MFL) at ‘A-/A-2’ (Single A-Minus/ A-Two). Outlook on the assigned rating is ‘Stable’. Previous rating action was announced on April 4, 2017.

Current ratings reflect MFL’s adequate liquidity profile and capitalization levels. The rating incorporates MFL’s position as one of the leading rice exporters in the country. In the past few years, rice exports remained highly competitive amidst availability of subsidized Indian rice in international markets making it relatively difficult for Pakistani exporters to retain market share. Nonetheless, as per the latest regulation imposed by European Union (EU), import of Basmati rice containing Tricyclazole above a specified threshold level will not be accepted. Given this recent development in the international market, MFL expects to capitalize on this opportunity resulting in higher exports.

During FY17, overall sales of the company grew by 10.5% and reached Rs.6b mark; growth in sales was largely a function of higher international prices. Although majority sales of MFL comprise exports, local sales have also contributed a significant proportion to the topline. Nevertheless, country wise concentration in sales of MFL is on the higher side. Given recovery in international prices, the company is projecting improvement in margins and overall profitability, going forward. MFL also anticipates higher profitability levels supported by its recent rice glucose venture.

With improved margins, fund flow from operations (FFO) was notably higher in FY17 translating into improved debt servicing coverage levels. With borrowings primarily short term in nature and the company carrying a sizeable amount of inventory/receivables, its ability to retire debt in a timely manner is considered adequate. However, future trend in this respect will be closely tracked. In order to fund expansion of its rice glucose plant and installation of its new rice mill, MFL plans to procure additional debt and equity through issuance of shares by Initial Public Offering (IPO). Developments in this regard are yet to be seen.

For further information on this rating announcement, please contact the undersigned (Ext: 207) or Mr. Javed Callea (Ext: 201) at 35311861-70 (10 lines) or fax to 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 2018 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