PACRA Maintains Entity Ratings of National Foods Limited

National Foods Limited’s (NFL’s) established presence since 1970 and strategic diversification into 13 product categories with around 300 SKUs underscore its sustainable financial trajectory. NFL’s calculated entry into the branded spice market has solidified its leadership in Pakistan’s food sector. The company’s focus on creditworthiness and effective use of brand equity signifies adept navigation in both local and global markets. Despite the prevalence of unbranded products in Pakistan posing a credit risk, NFL’s shift towards branded goods suggests credit-positive potential. Globally, NFL’s proactive approach maintains its credit standing amidst intense competition, particularly in the condiment space against Indian entities. NFL’s dedication to fiscal prudence and market adaptability anchors its positive credit profile. Its Dubai-based subsidiary, NF-DMCC, along with NEI in Canada , caters to the Middle eastern, North American and European markets, reflecting its international operational strength.
National Foods has exhibited a strong financial performance, with a ~10% increase in its topline during FY23 ascending to PKR ~29.6 bln (FY22: ~26.8 bln) backed by price and volumetric growth. The company's strategic initiatives and operational efficiencies have contributed to a Gross Margin of ~34.6% (FY22: ~33.4 bln, an Operating Margin of ~9.2% (FY22: ~8.9), and a Net Margin of ~7.4% (FY22: ~7.3%). The Return on Assets and Return on Equity were at ~9.66% (FY22: ~11.4) and ~31.2% (FY22: ~32.8%), respectively. National Foods Limited’s (NFL’s) rating affirmation is predicated on the company’s robust franchise value, underscored by a commanding market share and potent brand equity in its principal product segments. The intrinsic worth of the franchise is pivotal, enabling NFL to strategically extend its brand equity into new product categories, which is instrumental in propelling the company towards the fulfilment of its ambitious growth projections set forth by the management. The executive team at National Foods has consistently demonstrated astute capital management and a steadfast commitment to sustaining a strong credit profile. The company’s prudent financial policies, coupled with its agility in adapting to market fluctuations, and adherence to international standards in nutrition, health, wellness, quality and customer satisfaction provide a solid foundation for the continuation of the current rating.
The ratings reflect the management’s competence in sustaining profit margins and expanding market share. The realization of strategic growth initiatives is pivotal. Diligent management of working capital, along with the preservation of adequate cash flows and coverage ratios, is crucial for maintaining the ratings.

About the Entity
National Foods Limited (NFL) was incorporated as a private limited company in 1970. The company was subsequently converted into a public limited company in 1988. Operations of the company formally commenced in 1996. NFL is registered on Pakistan Stock Exchange and registered office of the company is located in Karachi. The manufacturing hubs of the company are strategically positioned in Port Qasim, Noori Abad, and M3 Motorway Faisalabad (partially operational). Leadership is under the stewardship of Mr. Zahid Majeed as Chairman and Mr. Abrar Hasan as CEO, supported by a cadre of seasoned professionals.