PACRA Maintains Entity Ratings of Mehmooda Maqbool Mills Limited

Pakistan imports a significant amount of edible oil, making it one of the most highly imported commodities in the country. Assuming the Genetically Engineered (GE) import ban is removed by third quarter FY23, total oilseed imports are forecasted to reach 2.6 million tons in FY24, which would be 71% higher than the estimated use for FY23. The price of Soybean oilseed stood at 1200 USD/MT in Jun-23, whereas the price of Palm Oil stood at 800 USD/MT in Jun-23, forecasted to ease further. Due to the rise in input costs, especially raw material cost, many companies have experienced a reduction in their profit margins and faced working capital shortages. Total oilseed production in FY24 is projected to increase to 2.95mln Tons. Higher selling prices have increased revenues substantially for the refineries; despite the rise in input costs could not be fully covered and gross profit margins have also been reduced Future outlook look of the industry is developing due to price volatility and PKR depreciation.
The ratings are indicative of Mehmooda Maqbool Mills Limited's ("Mehmooda Maqbool" or "the Company") affiliation with Maqbool textile mills Limited coupled with its efforts to build its own brand recognition in the edible oil and ghee sectors. Over time, the company has experienced advantages stemming from an enhanced customer base and expanded geographical presence. Despite facing economic restrictions, topline of the company dominated by semi refined edible oil and meal and stood at PKR 10,780mln during FY23 (FY22: PKR 9,403mln). Procurement of local seeds also benefitted the company. Where gross profit margin stood at 9.2% during FY23 (FY22: 8.1%), operating profit margin stood at 7.3% during FY23 (FY22: 6.4%). Net profit margin deteriorated due to finance cost and stood at 2.1% during FY23 (FY22:3.2%). Total debt of the Company increased (FY23: PKR 3,332mln, FY22: PKR 1,904mln) where rupee depreciation and increasing interest rate environment created an impact of net profit of the Company. Net profit of the Company stood at PKR 225mln during FY23 (FY22: PKR 301mln). However financial risk profile of the Company remains adequate as Company has improved cashflows. However, Leveraging of the Company remains adequate (FY23: 67%, FY22: 64%).
The ratings are dependent on the management's ability to maintain growth in business volumes while sustaining margins and profitability. Prudent management of leveraged capital structure is crucial. Effective changes in governance framework would be beneficial for the ratings.

About the Entity
Mehmooda Maqbool Mills Limited was incorporated in 1968, and is principally engaged in solvent extraction from oilseed, oil & ghee refining and flour milling. Solvent extraction units have a combined installed capacity of 400MT/day. Oil refining unit has an installed capacity of 72MT/day. Whereas, the flour mill has total installed capacity of 240MT/day. Moreover, the Ghee Mill has a total refining capacity of 100MT/day. Ownership of the Company vests with the Maqbool family (99%). Investment companies and Financial Institutions hold a negligible share of 1%. The Board is dominated by the Sponsoring family, and is Chaired by Mr. Tanvir Ahmad Sheikh, whereas, Mr. Mian Bakhtawar Tanvir Sheikh is the CEO. They are assisted by a team of professionals.