Press Release

JCR-VIS Assigns Initial Ratings to Olympia Oils (Pvt.) Limited

Karachi, April 12, 2018: JCR-VIS Credit Rating Company Limited (JCR-VIS) has assigned initial entity ratings of ‘BBB+/A-2’ (Triple B-Plus/A-Two) to Olympia Oils (Pvt.) Limited (OOL). Outlook on the assigned ratings is ‘Stable’.

The ratings assigned take into account OOL being the flagship company of a diversified industrial conglomerate “Monnoo Group” having business interests in textile, carpets, chemicals, synthetics, and poultry. The ratings draw strength from moderate business risk profile; the company follows a business to business model hence avoids mainstream competition with the major players of the branded oil market. The ratings incorporate vertical integration with group owned feed mills. Moreover, the ratings draw comfort from minimal reliance on long-term borrowings and adequate debt service coverage. However, the ratings remained constrained on account of depressed margins, high leverage, slow progression towards value-added segment and weak corporate governance framework.

Sales have exhibited considerable growth during FY17 mainly on the back of quantum increase in bulk sales of oil meal. However, the positive momentum in revenues have not fully translated into the bottom line on account of decline in margins which was, in turn, an outcome of increase in input prices. In rupee denomination, bulk sales comprised over four-fifths of the total revenue. The major revenue driver was soybean oil and soya based oil-meal. The concentration among top-10 customers has remained on the higher side. In line with enhanced earnings profile, FFO has been reported higher translating into improved debt service coverage ratio during FY17. Going forward, the company’s efforts of new market development with branding of retail products under the label “Areej” is likely to have a favorable impact on margins and profitability.

Total equity of the company increased on account of internal capital generation. The company’s debt matrix primarily comprises short-term borrowings. Leverage and gearing indicators have remained high. Given the business model with no equity injection planned by the sponsors in the foreseeable future, the leverage indicators are likely to remain at current levels or may increase.

Senior management team of the company comprises experienced resources having relevant experience in the industry. Meanwhile, corporate governance framework exhibits room for improvement.

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 2018 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