PACRA Maintains Entity Ratings of Jadeed Feeds Industries (Pvt.) Limited
The global feed industry is valued at ~$345bln, while poultry contributes (~$235bln) to the total industry. Pakistan has the capacity to produce ~10mln MT of feed annually. The industry generates an estimated annual turnover of ~PKR 350bln to PKR 450bln from local sales to poultry farms. Currently, an uptick in poultry prices has improved the dynamics of poultry and poultry feed segments. The cost of soybean oilseed, from where the industry extracts soybean meal, has seen a surge of ~50% till Dec-21. Moreover, the cost of maize posted an increase (~50%) in the local market. The cost of raw materials being higher relative to the price of poultry feed and products squeezed industry's margins. However, the industry is able to manage its working capital cycle in an efficient manner. Going forward, cashflows and liquidity are expected to improve contingent upon stable growth in margins.
The ratings reflect Jadeed Feed’s association with Jadeed Group, a leading and integrated player in the poultry supply chain. The Group has a significant presence along the poultry supply chain as it imports and breeds grandparent poultry stock (Ross 308). The Company's current business line comprises three main products: poultry feed variants, poultry breeding stock, and day-old chicks. At present, the Company has a strong topline dominated by poultry feed sales followed by poultry breeder stock and day old chick sales. Topline is expected to post stable growth on the back of significant demand for poultry products and increased prices. Margins are currently stable, however, are expected to improve slightly once internal synergies are streamlined. Inventory management system and related efficiencies would require the Company’s attention to keep its working capital costs low. Financial risk profile of the Company is characterized by moderate leveraging, to fund working capital needs. The coverages have improved on back of higher profitability and rationalized finance costs. The Sponsors have agreed to execute a formal shareholding agreement providing clarity on succession and governance framework and changes in governance framework would be beneficial. Significant deterioration in coverages and/or margins will have a negative impact on the ratings.
The ratings are dependent on the management's ability to prudently manage liquidity and working capital requirements. The management's ability to build profitable volumes and adherence to strong financial discipline remains critical for the ratings. Envisioned improvement in business and financial profile along with effective breeder stock and day-old chick sales.
Jadeed Feeds Industries (Pvt.) Limited, was incorporated in Jun-08 as a private limited company as per the Companies Ordinance 1984. The Company is primarily involved in manufacturing and selling variants of poultry feed, along with breeding and selling poultry breeding stock and day-old chicks. Currently, the Company's feed mills have a combined capacity to produce 240 MT/hour. Farms have a placement capacity of 2.6mln and a hatching capacity of 435mln eggs per annum. GP farms have a placement capacity of 0.3mln and a hatching capacity of 47.5mln eggs per annum.
Jadeed Feeds present shareholding structure suggests that Mr. Mian Muhammad Javaid, is the man at the last mile, as he holds major shares (~81%). The remaining stake resides with his two sons Mr. Muhammad Sohaib Javaid (~7%) and Mr. Muhammad Safwan Javaid (~7%), and wife, Mrs. Shazia Javaid (~5%). The BoD is dominated by the sponsoring family. The Board’s Chairman and the Company's CEO, Mr. Javaid, play a pivotal role in making strategic decisions.