JCR-VIS upgrades entity ratings of National Foods Limited

Karachi, March 31, 2014 (PPI-OT): JCR-VIS Credit Rating Company Ltd. (JCR-VIS) has upgraded the entity ratings of National Foods Ltd. (NFL) from ‘A+/A-1’ (Single A Plus/A-One) to ‘AA-/A-1’ (Double A Minus/A-One). Outlook on the assigned ratings is ‘Stable’.

The assigned ratings take into account the prominent position of NFL in the package food industry and the conservative financial risk profile. NFL continues to invest in its brands and distribution networks to sustain its market position.

Net sales increased by around 20% during FY13 with growth spread across the product spectrum. While remaining strong, margins had followed a downward trajectory over the period 2008-11; there has been an uptick in the same over the last two years.

Improvement in margins during FY13 and in the ongoing year is attributable to product mix optimization, cost rationalization and process improvements in supply chain management. Management plans to consolidate downstream distribution network to maximize operating efficiencies.

The company continues to pursue its vision to achieve sales of Rs. 50b by 2020. Given the current pace of increase in sales, this may not be readily achievable by organic growth alone. In addition to expanding domestic market operations, increased global market penetration is also envisaged.

So far, the contribution of exports to total sales is modest as the company faces stiff competition from more established brands. In view of this, new product line is expected to be launched in the international markets.

Capital structure of the company has remained conservative. Retention of profits has resulted in a growing equity base. Meanwhile, utilization of borrowings remains limited. In recent years, there has been greater focus on improving working capital management. The company also has room to finance expansion through internal sources without placing any stress on its debt servicing capacity.

For more information, contact:
Ms. Sobia Maqbool
CFA
JCR-VIS Credit Rating Company Limited
Tel: at 021-35311861-70
Fax: +9221 35311872-3

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