The Pakistan Credit Rating Agency Limited
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Faiqa Qamar

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PACRA Maintains Entity Ratings of National Foods Limited

Rating Type Entity
(20-Apr-23 )
(19-Apr-22 )
Action Maintain Maintain
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. Today, the Company offers a diversified product portfolio of 11 product categories and almost 250 SKUs. National Foods is Pakistan’s leading player in the multi-category food market and holds sizeable brand equity in most of its product categories, both - in local and export market. Locally, unbranded segment always had sizeable presence in the market. However, over the years, an opportunity for expansion has risen in the branded segment. Globally, India has been a major competitor in condiment segment.
National Foods operates in the global market via its wholly-owned subsidiary, National Foods DMCC (NFL DMCC), which is based in the UAE. The investment in A1 Cash & Carry, facilitated by National Epicure Inc. (Canada), a wholly-owned subsidiary of NFL DMCC, has enabled the necessary diversification and considerable growth over the years. The Company derives strength from its holding company structure and stable international operations.
National Foods enjoy a sound risk profile and continues to increase its topline backed by price and volumetric growth. Increase in export sales prices has also supported this growth. The Company has maintained stability in healthy margins and profitability trend; despite raw materials remain price sensitive and marketing expenses were noticeably high. Competition in the recipe mixes segment remains considerably high; however, the management reflects confidence in holding the current performance pattern. 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 cycle. Also, the profitability at a consolidated level is significantly promising. Moreover, sponsors' business acumen and their widespread reach remains beneficial for the ratings. Strong governance framework further adds strength to the Company's profile
The ratings are dependent upon the management’s ability to sustain margins while improving its market share. Materialization of growth activities remain critical. Prudent management of the working capital, maintaining sufficient cash flows and coverages remain 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 11 product categories with 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. Mr. Zahid Majeed is the Chairman of the Board, 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.