The Pakistan Credit Rating Agency Limited
Press Release


Ahmad Faraz Arif

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PACRA Maintains Entity Ratings of National Foods Limited

Rating Type Entity
(19-Apr-22 )
(19-Apr-21 )
Action Maintain Initial
Long Term AA- AA-
Short Term A1 A1
Outlook Stable Stable
Rating Watch - -

National Foods Limited (‘National Foods’ or ‘the Company’) was established in 1970 with an objective to introduce branded and packaged spices. Over the years, the Company has diversified its product portfolio into 11 product categories and almost 250 SKUs. The Company has shown a strong character by converting its challenges into opportunities. Today, National Foods holds sizeable brand equity in most of its product categories. The Company is Pakistan’s leading player in the multi-category food market. The market operates with unbranded segment as a sizeable player. However, an opportunity for expansion exists in the branded segment.
National Foods enjoy a sound risk profile and continues to increase its top-line backed by volumetric growth. The Company has maintained healthy margins and profitability over the years despite its raw materials remaining price sensitive, and increased marketing expenses. Although competition is heating up for its recipe mixes segment, the management is confident to hold current performance pattern. The Company's financial performance witnessed steady growth during FY21 driven by effective cost management, higher selling prices, and increase in exports. Ratings draw strength from the Company’s strong financial profile represented by a modestly leveraged capital structure, stable coverages and efficient management of working capital.
National Foods entered the international market through a wholly owned subsidiary, National Foods DMCC (NFL DMCC), a UAE based company. The recent investment in A1 Cash & Carry, through National Epicure Inc. (Canada) - a wholly owned subsidiary of NFL DMCC, provides the requisite diversification. The Company derives strength from its holding company structure and stable international operations, which bodes well for the ratings. Also, the profitability at a consolidated level is significantly promising. Ratings draw comfort from sponsors' business acumen and their widespread reach. Strong governance framework adds strength to the Company's profile.
The ratings are dependent upon the management’s ability to sustain margins while improving its market share. Timely commencement of growth activities remain critical. Prudent management of the working capital, maintaining sufficient cash flows and coverages are imperative for the ratings.

About the Entity
National Foods Limited was incorporated as a private limited company in 1970. The Company was listed on Pakistan Stock Exchange in 1988. Currently, the Company is engaged in the production of convenience food items with a portfolio of over 11 product categories and almost 250 SKUs. The manufacturing facilities are located in Port Qasim, SITE, Nooriabad and Gujranwala.
Major shareholding resides with sponsors through ATC Holdings (Pvt.) Limited (~34%), and individual family members (~23%). Directors and their family members hold ~16% stake while, Foreign Companies hold ~15% shares. Remaining ~12% of stake resides with the general public. The Company is yet to fill the vacancy of Chairman of the Board's position, whereas, Mr. Abrar Hasan heads the Company as the Chief Executive Officer. He is aided by a team of experienced professionals.

The primary function of PACRA is to evaluate the capacity and willingness of an entity to honor its obligations. Our ratings reflect an independent, professional and impartial assessment of the risks associated with a particular instrument or an entity. PACRA's comprehensive offerings include instrument and entity credit ratings, insurer financial strength ratings, fund ratings, asset manager ratings and real estate gradings. PACRA opinion is not a recommendation to purchase, sell or hold a security, in as much as it does not comment on the security's market price or suitability for a particular investor.