Press Release

VIS Assigns Initial Entity Ratings to Golden Harvest Foods (Private) Limited

Karachi, October 25, 2021: VIS Credit Rating Company Limited has assigned an initial entity ratings of Golden Harvest Foods (Private) Limited at ‘BBB+/A-2’ (Triple B Plus /A-Two). The long term rating of ‘BBB+’ signifies adequate credit quality with reasonable and sufficient protection factors. Risk factors are considered variable if changes occur in the economy. Short term rating of ‘A-2’ denotes good certainty of timely payments coupled with sound liquidity and company fundamentals. Outlook on the assigned ratings is ‘Stable’.

Incorporated in 2000, GHFL a private limited company. The Company is principally involved in the business of manufacturing and trading bakery products and ready to eat frozen meals. GHFL is authorized to produce and distribute product suite of bakery products and ready to eat frozen meals under the brand name of ‘Dawn Bread’ Mezban and Cake Shake, in the jurisdiction of Karachi and Baluchistan (domestically) and under the brand name of “Dawn Bread”, Mezban, and Cake Shake internationally..

The assigned rating incorporates the market positioning of the ‘Dawn Bread’ brand, a market leader in the bread products industry in Pakistan. The brand’s long operational history and broad product suite are viewed as rating strengths. Furthermore, the Company has a sizable export clientele, which contribute about half of the Company’s topline. Country-wise concentration is manageable, and improving on a timeline. The Company operates in the Consumer - FMCG segment, which VIS classifies as Medium risk, being characterized by low cyclicality, high to medium competition and low energy sensitivity.

A review of Company’s historical performance is indicative of consistent growth in topline and gross margins, which have steadily inched up. Going forward, as product suite broadens and as Company’s sales mix shifts from its main product to newer product lines, gross margins will increase further as the latter feature relatively better margins. Furthermore, risk exposures are minimal, with 70% sales in the general trade category and a manageable cash conversion cycle (3 year average: 72 days). Exposure to credit risk is also minimal, as indicated by the absence of any doubtful debt provisions historically. The Company’s cashflows as of FY21, provided 38% coverage of long term debt, reflecting full long term debt with a little over 2.5 years cash flows. Given expansion of operations, gearing has increased in recent years. However, given history of full profit retention and projected additional revenues from the new plant, gearing is likely to sustain at similar level during the rating horizon.

Corporate Governance infrastructure in place is reflective of GHFLs operational status as a family-owned unlisted entity. At present, the Board Chairman and CEO position is held by the same individual.

For further information on this rating announcement, please contact the undersigned (Ext: 201) or Arsal Ayub (Ext: 216) at 021-35311861-71 or fax to 021-35311872-3.

Javed Callea

VIS Entity Rating Criteria: Corporates (August 2021)

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