PACRA Maintains Entity Ratings of Asif Rice Mills

Rice is one of the major staple foods (second after wheat) as well as cash crops in Pakistan. ~52% of the total rice production in Pakistan is done in Punjab, ~38% in Sindh and remaining ~8% in Baluchistan. Pakistan ranks 11th in the global rice production (~50% basmati; remaining ~50% coarse types). After absorbing the consequences of floods during FY23, the rice production is estimated at ~9.0mln MT for FY24 due to better climatic conditions and more availability of water for irrigation. Meanwhile, Exports are forecast to reach ~5.5mln MT in FY24. The abundant harvest, along with India’s export bans, competitive pricing, and heightened demand from Indonesia and Africa is driving the current robust export performance. Also, it is noteworthy that out of the forecast exports of ~5.5mln MT in FY24, the actual rice export of ~4.0mln MT for the period 8MFY24 is higher than the export level in FY23 (~3.6mln MT).
The ratings indicate Asif Rice Mills ‘s (the business) prominent position in the Pakistan’s export segment. Over the years, while experiencing growth in revenue, export sales of the Business experienced a decrease of 35% due to decrease in rice production caused by floods. Diversification in the product line also proved to be beneficial for the Business as the Business also entered in a new product line- Food Colors and generated revenue from this segment amounting PKR 4.7bln during FY23. Total revenue of the Business stood at PKR 23,412mln during FY23 (FY22: PKR 28,975mln). Decrease in exports resulted decrease in freight expense which ultimately led to increase in profits as the profit of the Business stood at PKR 1,425mln during FY23 (FY22: PKR 831mln). Due to decrease in the said expense, net profit margin increased and stood at 6.1% during FY23 (FY22: 2.9%). Financial risk profile of the Business based on Strong working capital management, Coverages and Capital Structure. Leverage of the Business remains on the lower side that indicated the cushion to borrow. Better reporting and improved governance control adds value in the Business’s practices that would be beneficial for the ratings.
The ratings are dependent upon sustenance of business volumes under the current challenges in the local economy. As global economy undergoes distress, business sustainability emerges as the key challenge for the exporters. Meanwhile, keeping up with a stable financial risk profile, particularly debt servicing capacity, remains imperative for ratings.

About the Entity
Asif Rice Mills (‘Asif Rice’ or ‘the Business’) was incorporated in 2006 as an Association of Persons (AoP). Major ownership of the Business resides with the sons of Mr. Mumtaz Ali. Mr. Asif Ali Shaikh holds ~34% shareholding, while Mr. Hanif Shaikh and Mr. Kashif Mumtaz hold ~33% each. Asif Rice is primarily engaged in processing semi-processed variants of non-basmati rice and limited quantities of basmati rice and exporting it to China, Far-east Asia, Europe, and Africa. The Business has a processing capacity of 90MT per hour, currently. Mr. Asif Ali Shaikh is the CEO, while the other sponsoring individuals Mr. Kashif Mumtaz and Mr. Hanif Shaikh serve as Directors of Sales and Procurement respectively.