The Pakistan Credit Rating Agency Limited
31-Dec-18
Analyst
Ayesha Qasim
ayesha.qasim@pacra.com
+92-42-35869504
www.pacra.com
Applicable Criteria
- Methodology | Corporate Ratings | Jun-18
- Methodology | Criteria | Rating Modifier | Jun-18
- Methodology | Correlation Between Long-Term And Short-Term Rating Scale | Jun-18
Related Research
This press release is being transmitted for the sole purpose of dissemination through print/electronic media. The press release may be used in full or in part without changing the meaning or context thereof with due credit to PACRA
PACRA Assigns Initial Entity Ratings to LOTTE Kolson (Pvt.) Limited
| Rating Type | Entity | |
|
Current (31-Dec-18 ) |
||
| Action | Initial | |
| Long Term | A- | |
| Short Term | A2 | |
| Outlook | Stable | |
| Rating Watch | - | |
The ratings reflect the Company’s association with Lotte Corporation, one of the biggest conglomerates in South Korea, and expected group support. Promising consumer sentiment in conjunction with higher production has led to growth in revenues over the years. Ratings draw strength from the Company’s established market presence in the snacks industry and experienced management team. The Company recently commenced operations of its state-of-the-art ‘Chocopie’ plant. However, utilization remains low due to slow market pickup. Meanwhile, margins have come under pressure recently owing to aggressive marketing campaigns to promote new products and increasing raw material costs, aggravated by rupee devaluation. The Company witnessed weak business performance owing to intense competition and losses incurred from operations. The Company has an adequate financial profile, represented by strong working capital management, moderately leveraged capital structure and weak coverages.
The ratings are dependent on the Company’s ability to improve utilization of new plant, resulting in better margins, while maintaining working capital discipline. Any deterioration in margins and/or coverages will put pressure on the ratings. Continued support from Lotte Corporation, technically and financially, is critical for ratings.
About
the Entity
Lotte Kolson (Private) Limited (the Company) was incorporated in March, 1975. The Company was formerly known as KS Sulemanji Esmailiji & Sons (Private) Limited and was fully acquired by Lotte Corporation in 2014. Primary business activity of the Company involves manufacture and sale of five product categories, namely, snacks, biscuits, pasta, cakes and gum. The Company has six production facilities concentrated in Karachi, Lahore and Islamabad.
Major shareholding (96.5%) lies with Lotte Corporation, one of the biggest conglomerates of South Korea. Remaining shareholding (3.49%) lies with Mr. Dong Bin Shin, Chairman of Lotte Corporation. The Company is headed by Mr. Khayyam Rajpoot, who is the Chief Executive Officer. He is ably supported by a professional management team. The Company has a four member board and lacks representation of independent members.