Press Release

JCR-VIS Upgrades Entity Ratings of Matco Rice Processing (Pvt.) Limited to A-/A-2

Karachi, June 15, 2012: JCR-VIS Credit Rating Company Limited (JCR-VIS) has upgraded the entity ratings of Matco Rice Processing (Pvt.) Limited (Matco) to ‘A-/A-2’ (Single A-Minus/ A-Two) from ‘BBB+/A-3’ (Triple B Plus/A-Three). Outlook on the rating is ‘Stable’.

Following the injection of equity of USD 5m by International Finance Corporation (IFC) in Matco, IFC is now a shareholder in Matco along with the founding shareholders of the company. IFC has proposed recommendations and timelines to the Board and management for improving the corporate governance framework of the company. Improvement is also expected in the financials of the company, particularly the capital structure. Fresh equity will be channelized in capacity expansion and working capital requirements at Sadhoke, Punjab. Gross margin of rice processed at the Sadhoke plant are expected to be double that of Karachi’s rice processing facilities on account of cost-efficiencies arising from some degree of vertical integration.

Market share of Matco in overall Basmati rice exports by Pakistan was 5.6% in FY11. The company’s gross margins have hovered in the range of 13-14% in the past two and a half years. With steadiness in global supply and demand dynamics of the rice industry in the past two years and stability expected in the same, going forward, upside potential in price of rice is limited. Nevertheless, gross margins of the company may receive impetus from rupee devaluation, if any, coupled with planned capacity expansion of Sadhoke plant to come online at a gradual pace.

Gearing of the company was below 2x at end-Dec’11 on account of augmentation in equity base from profit retention. With impact of fresh equity injection to be reflected in 4QFY12, gearing is expected to come down further. Moreover, debt servicing capacity of the company is considered sound.

For further information on this rating announcement, please contact Mr. Javed Callea (Ext: 501) or Ms. Sobia Maqbool, CFA (Ext: 510) at 021-35311861-70 or fax to 021-35311873.

Jamal Abbas Zaidi
Deputy CEO

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 2012 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