PACRA assigns Initial Ratings to Hilal Foods (Pvt.) Limited

Hilal Foods is one of the country's leading FMCG companies in the value-added food sector, featuring advanced manufacturing facilities and renowned brands built on a foundation of innovation and excellence. Since its inception in 1957, Hilal Foods is manufacturing high-quality products with a prime focus on continuous improvement. The Company leverages the strong brand equity of its flagship brand, “Hilal,” which is a key driver of its market positioning and competitive advantage. The Company’s product line consists of more than 40 products, divided between two major verticals: Confectionary and Baking. Some of their brands are known for the niche, in which they operate like “Ding Dong”, and “Freshup” and similarly “CupKake”, and “Bake Time.” These are key consideration in the assigned ratings. The assigned ratings of Hilal Foods (Pvt.) Limited (“Hilal Foods” or “the Company”) reflects the Company’s dominant market position and ability to diversify and innovate. This diversity is well integrated into the company’s current sale composition, where PKR 1bln and more revenue is being generated from a number its products. Diversity of revenue stream is a big plus. Ratings recognize that the competition is tough and becoming increasingly multi-dimensional. Cognizant of the same, the management is proactively deploying new strategies to fend off the competition and preserve its relative position.
Hilal Foods' revenue is almost equally contributed by both segments: ~44% from the baking segment and ~56% from the confectionery. Geographically, domestic sales contribute ~93% of total revenue, while export sales account for the remaining ~7%; exports are becoming a focus of attention. The Company’s top-line revenue demonstrated a 5% year-over-year growth in FY24, principally driven by favorable adjustments in sales pricing. The Company demonstrated improved profit margins during the reporting period. Gross profit margin improved primarily due to effective cost of goods sold management and cost saving initiatives. The operating profit margin also exhibited growth, albeit at a moderated pace due to increased marketing expenditures. Additionally, a reduction in finance costs also contributed to the enhancement of net profit margin, enabling Hilal Foods to reverse the net loss incurred in FY23. The Company maintains a sound financial risk profile, supported by sufficient coverage and a well-managed working capital cycle. Leverage indicators are adequate. The Company’s proactive approach to market dynamics, adherence to global product quality standards, focus on customer satisfaction, and alignment with industry benchmarks further support its credit ratings. The sponsor's historical experience, commitment to the business, and support reinforce confidence in the Company's creditworthiness. They are also taking steps to bolster the corporate governance character of the Company by voluntarily adopting “Code of Corporate Governance”.
The ratings are dependent on consistent growth and improvement in margins. Maintaining sound financial discipline, prudent working capital management, and adequate cash flow and coverage will be crucial for ratings.

About the Entity
Hilal Foods (Pvt.) Limited was established in 1957 with the name of Hilal Confectionary (Pvt.) Limited. Later it merged with Kings Food Company and was renamed as Hilal Foods (Pvt.) Limited. The Company's ownership is concentrated with the Munshi family. Mr. Fahad Munshi, with his sound entrepreneurial skills, serves as the Chief Executive Officer. A team of experienced professionals assist him, which is again a testimony of the sponsor’s future vision.