PACRA Maintains Entity Ratings of Jadeed Feeds Industries (Pvt.) Limited
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 and maize has seen a surge of ~50% during FY22. However, during 6MFY23, oilseed cost remain on a declining trend. While rupee depreciation made exports expensive for the local crusher; hence, meal cost also posted an inflationary trend. Despite increase in the feed and poultry product prices, industry's margins remain stretched. However, the industry is able to manage its working capital cycle in an stable manner. Going forward, cashflows and liquidity are expected to remain stable. The FY22 floods have damaged livestock and crops. Overall, ~31% of livestock holders have lost animal/poultry due to floods and ~54% of affected households reportedly lost poultry feed. Consequently, livestock holders are facing a severe shortage of fodder/feed for livestock. This is expected to lead an increase in feed prices in FY23.
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. The Company's topline is dominated by poultry feed sales followed by poultry breeder stock and day old chick sales. Topline remains strong supported by increased prices. However, increased cost has impacted the margins. Inventory management system and related efficiencies are expected to keep the Company's working capital costs low. The financial risk profile is demonstrated by an adequate cash cycle to fund working capital needs, Coverages and capital structure remain strong. The Sponsors need to execute a formal shareholding agreement to provide clarity on succession. Moreover, changes in governance framework would be beneficial.
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. Significant deterioration in coverages and/or margins will have a negative impact on 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 443mln 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.