Press Release

JCR-VIS Reaffirms Ratings of Haleeb Foods Limited

Karachi, January 11, 2019: JCR-VIS Credit Rating Company Limited (JCR-VIS) has reaffirmed the entity ratings of Haleeb Foods Limited (HFL) at ‘A/A-2’ (Single A/A-Two). The medium to long-term rating of ‘A’ denotes good credit quality coupled with adequate protection factors. Moreover, risk factors may vary with possible changes in the economy. The short-term rating of ‘A-2’ denotes good certainty of timely payments. Liquidity factors and company fundamentals are considered sound. Outlook on the assigned ratings is ‘Stable’. Previous rating action was announced on October 31, 2017.

HFL is a subsidiary of MEGA Foods (Pvt.) Limited, while the remaining shareholding is vested with the Chaudhry family and others. HFL is one of the major dairy companies operating in the packaged milk & dairy products segment of Pakistan’s dairy industry. The assigned ratings take into account moderate business risk profile of the company, underpinned by positive demand dynamics of the dairy industry, established brand equity in the tea whitener and UHT milk categories and further diversification into new variants of fruit juices and flavored milk products. The ratings also factor in low financial risk of the company as depicted by low leveraged capital structure and adequate coverages. The liquidity position of HFL is supported by investments in cash and money market mutual funds.

The ratings are constrained by increasing intensity of competition in value-added dairy and challenging operating environment of the organized dairy segment. Moreover, the declining trend in sales and profits was mainly on account of reduced demand for tea whiteners, which is the major sales driver of the company. Meanwhile, effective implementation of strategic initiatives to halt the declining trend in sales remains to be seen in a scenario where increasing pressure of commodity inflation has been witnessed recently due to devaluation of local currency. The ratings will remain dependent on maintenance of debt leverage at prudent levels, profit margins, and sponsors’ support, going forward.

For further information on this rating announcement, please contact the undersigned at 021-35311861-70 or Mr. Maimoon Rasheed at 042-35723411-13.

Javed Callea

Applicable rating criterion: Industrial Corporate (May, 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 2019 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