Press Release

VIS Credit Rating Company Assigns Positive Outlook to Agro Processors and Atmospheric Gases Limited

Karachi, March 26, 2021: VIS Credit Rating Company Limited (VIS) has maintained the entity ratings of Agro Processors and Atmospheric Gases Limited (APAG) at ‘BBB-/A-2’ (Triple B minus/A-Two) with a Positive outlook. The medium to long term rating of ‘BBB-’ signifies adequate credit quality. Protection factors are reasonable and sufficient while risk factors are considered variable if changes occur in the economy. The short term rating of ‘A-2’ indicates good certainty of timely payments. Liquidity factors and company fundamentals are sound. Access to capital markets is good. Risk factors are small. The previous ratings of ‘BBB-/A-2’ with a Stable outlook announced on August 22, 2019 were suspended on November 18, 2020 due to non-availability of updated information.

Incorporated in 1980, APAG is involved in manufacturing and sale of cooking oil, banaspati and related products for over four decades. The assigned ratings incorporate established track record of sponsors in edible oil business, significant brand recognition of products including ‘Soya Supreme’ and stable demand prospects for edible oil in the domestic market. Nevertheless, the ratings continue to remain constrained on account of elevated leverage indicators and limited cash flow generation due to low profitability.

The revision in outlook takes into account the partnership agreement with Private Equity Partner. As per the agreement, fresh equity injection will take place in the company with issuance of shares to the Private Equity Partner. The Partner is a well reputed business group in the country having management and supply chain expertise. According to the management, this arrangement will allow the company to further expand national reach of its brands. Equity injection reflects potential for deleveraging going forward.

Business risk profile remains moderate as the Pakistani edible oil industry is characterized by high competitive intensity due to fragmentation and low barriers of entry which result in limited pricing power and inherently thin profitability margins. Moreover, the industry is also subjected to high taxation regime. However, the demand for edible oil is inelastic given the growing population of the country and low average per capita consumption in the country vis-à-vis the world benchmarks. The sector is highly dependent on imported oil seeds and palm oil to meet local demand. Hence, the key risk factors include exposure to volatility in the exchange rates and international oil prices.

Profitability profile is constrained by sizeable finance cost and high effective tax rate. However, improvement in profitability was observed in Q1’FY21 on account of recovery in bulk sales post COVID-19 lockdown and decrease in benchmark finance rates. Overall liquidity profile remains constrained due to limited funds generated from operations and extended working capital cycle which requires utilization of short-term borrowing. Comfort is drawn from adequate debt servicing ability and expected equity injection in the company which may lead to reduction in utilization of short term borrowings. Going forward, the ratings remain dependent on the company’s ability to depict improvement in profitability, liquidity and capitalization indicators.

For further information on this rating announcement, please contact Mr. Narendar Shankar Lal (Ext: 203) at 021-35311861-71 or email at

Saeed Khan
Executive Director

Applicable Rating Criteria: Industrial Corporates (April 2019)

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 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 2021 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .

VIS Credit Rating Company Limited