Analyst
Usama Ali
usama.ali@pacra.com
+92-42-35869504
www.pacra.com
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PACRA Maintains Entity Ratings of Sabirs' Vegetable Oils (Pvt.) Limited
Rating Type | Entity | |
Current (20-Jan-25 ) |
Previous (20-Jan-24 ) |
|
Action | Maintain | Upgrade |
Long Term | BBB | BBB |
Short Term | A2 | A2 |
Outlook | Stable | Stable |
Rating Watch | - | - |
The assigned ratings to Sabirs’ Vegetable Oils (Pvt.) Ltd. (referred to as ‘Sabirs’ Oil’ or ‘the Company’) reflects its strong affiliation with the Sabirs’ Group, a leading player in Pakistan’s poultry sector, and its strategic synergies with Sabroso, one of the country’s largest frozen food brands. The Company’s core product offerings include soybean meal, primarily sold to group entities, and semi-refined oil, distributed in bulk. Its vertically integrated operational strategy further mitigates customer concentration risk, providing a stable foundation for its financial profile. The Company has successfully doubled its capacity expansion over the past year, strategically positioning itself to meet the rising demand, especially from internal group entities. Pakistan's edible oil industry heavily relies on imports since oilseeds and edible oil account for ~80% of the cost of production. During the year, 2.7mln tonnes of edible oil (including oil extracted from imported oilseed) of value PKR 794bln (US $ 2.8bln) was imported as compared to 2.2mln tonnes in FY23. Local edible oil production remains at 0.47mln tonnes (FY23: 0.50mln tonnes). The rating factors in notable revenue growth of 88% year-on-year in FY24. During FY24, the company strategically shifted its procurement focus from non-GMO soybean meal to local rapeseed meal. This change was driven by the need to optimize its supply chain and adapt to market conditions. However, the substitution of soybean meal with rapeseed meal introduces a notable variation in the protein concentration, with rapeseed offering a lower protein content, which could have implications for the nutritional value. Margins remained thin, driven by rising raw material costs and competitive pressures. The Company faces credit risk stemming from its exposure to foreign exchange volatility, primarily due to its reliance on imported soybean seeds. Additionally, Agro-climatic risks pose a threat to the availability and pricing of raw materials, while regulatory uncertainties further amplify the risk profile. The company’s financial risk profile has strengthened significantly, marked by the complete elimination of borrowings in FY24. The ratings continue to reflect the extensive experience and strategic acumen of the promoters, which remain integral to the company’s operations. However, governance remains a constraining factor, with a family-centric management structure, the absence of independent board oversight, and limited formalization in succession planning. Governance improvements would be credit-positive and could enhance the company’s resilience to external shocks.
The assigned ratings reflect the management's effective oversight of the Company’s liquidity position and debt structure, alongside initiatives to support revenue growth. An improvement in both the Company’s business and financial profiles is considered integral to supporting its credit quality. Conversely, material or sustained pressures on revenue generation or weakening coverage metrics could negatively impact the ratings.
About
the Entity
Sabirs’ Oil was incorporated in 2017 as a private limited concern. Company is primarily engaged in the process of seed filtering, crushing, oil extraction and refining by mechanical and chemical process. Sabirs' Oil has a crushing capacity of 225,936 MT/year and utilized up to ~42%. Sabirs’ Oils majority ownership resides with Dr. F.M Sabir (22.7%). Mr. F.M Sabir have five sons which collectively hold ~70.65% of the Shareholding. The remaining stake resides with two associated companies Sabirs’ Poultry (Pvt.) Ltd. (3.76%) and Shahzor Feeds (Pvt.) Ltd. (2.89%). The BoD is dominated by the sponsoring family. Dr. F.M Sabir serves as Board’s Chairman and CEO.