Rating History
Dissemination Date Long-Term Rating Short-Term Rating Outlook Action Rating Watch
16-Jan-25 A A1 Negative Maintain YES
16-Jan-24 A A1 Negative Maintain YES
16-Jan-23 A A1 Negative Maintain YES
17-Jan-22 A A1 Stable Maintain -
06-Feb-21 A A1 Stable Maintain -
About the Entity

Loads Limited ('the Company') was established in 1979 as a private limited company and got listed on Pakistan Stock Exchange in 2016. The Company is mainly engaged in the production of auto parts namely: exhaust systems, metal sheet components and radiators. Major stake of ~37.67% is held by Mr. Syed Shahid Ali. Mr. Shahid chairs the Company's BoD; while, Mr. Mohtashim heads as the CEO, and is assisted by team of experienced professionals.

Rating Rationale

Pakistan's auto industry is a part of large-scale manufacturing, accounting for ~73% of the overall value of manufacturing activities within the country. The industry is fairly fragmented with a large number of players. There are over ~2,000 Automotive Parts vendors in Pakistan, of which ~400 vendors belong to the Tier-1 category and are suppliers for the OEM market. The demand is primarily driven by auto sales and is met through OEMs, replacements, and export markets; while the remaining is met through imports. However, during FY24, production level and thus, sales of the auto industry posted a decline, primarily due to import restrictions imposed by the SBP; encompassing essentials like CKD and SKD kits. Overall the sector’s margins remain sensitive to inflation, interest rates, and exchange rates.
Loads Limited ('Loads' or the Company') is associated with Treet Corporation. The assigned ratings reflect the Company's position in the niche market of automotive products. Loads is a prominent automotive parts manufacturer catering to Original Equipment Manufacturers (OEMs) and Replacement/Aftermarket (RM). Persistent economic instability, inflationary pressures, and exchange rate fluctuations have impacted the Company's overall performance. Subdued topline, a decline of ~0.1% during FY24 driven by a volumetric dip of ~29% and reduced business margins has impacted the Company's overall performance outlook. Profitability remains impacted due to impairment booked on the markup to be received from Hi-Tech Alloy Wheel Limited ('Hi-Tech'), a subsidiary company. The Company holds a significant investment in Hi-Tech and its commissioning got delayed due to economic uncertainty and a downturn in the auto sector. The expected sale of the asset (Hi-Tech) may bring in substantial liquidity to manage the Company's repayment schedule. However, materialization of the same remains a challenge. This along with working capital related challenges and a declining equity base remains critical. The financial risk profile is weak. However, the management projects to revive and diversify the revenue generating avenues, and envisions to strategize its financial risk by managing the overall debt quantum on the balance sheet. Timely and successful materialization of these initiatives remain imperative. In the meantime, technical and financial support from the sponsors add the requisite respite; thus, provides comfort to the ratings.

Key Rating Drivers

The ratings are dependent on the Company’s ability to improve its business risk vis-à-vis financial risk profile along with a strategy revamp to sustain the margins. Cautious management strategies amidst challenging industry environment are pertinent. Moreover, prudent management of financial affairs remains important.

Profile
Legal Structure

Loads Limited ('Loads' or 'the Company') was incorporated on 01-Jan-79 as a private limited company. The Company got listed on Pakistan Stock Exchange (PSX) in 2016.


Background

Over the years the Company has expanded itself and currently, it has four subsidiaries including Specialized Autoparts Industries (Pvt) Ltd., Multiple Autoparts Industries (Pvt) Ltd., Specialized Motorcycles (Pvt) Ltd., and Hi-Tech Alloy Wheels Ltd. Primary business of these companies is the manufacturing and selling of motor vehicle parts.


Operations

The Company manufactures radiators, exhaust systems, and sheet metal components for automobiles, showcasing a diverse product range. Key clients include Toyota, Honda, Suzuki, Hino, Nissan, Isuzu, Massey-Ferguson, Mitsubishi, Yamaha, among others. It operates two manufacturing plants, DSU 19 and DSU 38, situated at Port Qasim, Karachi. Additionally, Loads possesses an in-house facility for dye designing and manufacturing, equipped with advanced CNC automatic machines.


Ownership
Ownership Structure

The major stake (~37.67%) is held by Mr. Syed Shahid Ali. While, Treet Corporation Limited (Associated Company) holds (~12.5%), followed by Others (~10%), Directors (~3.86%) and Insurance Companies (~0.02%). The general public holds the remaining stake of ~ 36%.


Stability

The ownership of the Company is expected to remain stable in the future.


Business Acumen

The Sponsors, Treet Corporation Limited is a leading Pakistani conglomerate with over 70 years of experience, drives innovation across various industries such as automotive, personal care, healthcare, packaging, and energy storage. It operates through several listed and public subsidiaries or associated companies.


Financial Strength

Over the years the Company maintained its financial strength. Going forward, in case of any financial support, the Sponsors will assist the Company.


Governance
Board Structure

The overall control of the Company lies with a seven-member Board. The BoD comprises three Non – Executive, two Executive and two Independent Directors. The Board has a dominating presence of Sponsors with one female director.


Members’ Profile

The Chairman of the Board, Mr. Syed Shahid Ali holds an overall experience of more than four decades and is associated with the Company since 01-Jun-05. He is also the Chairman of Treet Corporation Limited and is on the Board of various companies. Mr. Munir K. Bana is the Vice Chairman and holds an overall experience of more than four decades. He has been associated with the Board since 1996. Other members of the Board carry diversified professional experience and have served in leading positions.


Board Effectiveness

During FY24, the Board met six times. The Board is assisted by two committees namely; Audit Committee and Human Resources & Remuneration Committee. Both the committees are chaired by Independent Directors. The minutes of the meetings are formally documented.


Financial Transparency

External Auditors M/S Yousaf Adil, Chartered Accountants has issued an unqualified audit report pertaining to the financial statements for FY24. The firm is QCR rated and on SBP's panel in category "A".



Management
Organizational Structure

The Company operates through nine departments namely: (i) Finance, (ii) IT, (iii) Import, (iv) Human Resource & Admin (HR), (v) Technical, (vi) Special Project & Development, (vii) Production, (viii) Material Planning & Sales and (ix) Quality Assurance / ISO. Head of Finance, IT and Import reports to CFO. While, Heads of operational departments report to Chief Executive Officer (CEO), who then reports to the Board. However, the Head of Internal Audit and HR functionally reports to the respective Board committe, and administratively to the CEO.


Management Team

Mr. Mohtashim Aftab has been appointed as the Chief Executive Officer (CEO) of Loads, effective from 17-May-24. He brings an overall experience of 30 years in business partnering, strategic planning, and risk management. He also serves as the CEO and Director of all subsidiaries of Loads. Mr. Shamim Ahmed Siddiqui has served as the Chief Financial Officer (CFO) of the Company since 2005 and holds an overall experience of above three decades. He is associated with the Company since 1984. The other management team members are comprised of seasoned professionals, each with a range of expertise in their respective fields.


Effectiveness

The Company has an operational management committee to monitor overall operations. The committee is chaired by the CEO and comprises senior management. The committee meets monthly to monitor the operational challenges and strategies.


MIS

The Company utilizes an SAP system for generating daily, weekly and monthly reports, alongside other extensive data capabilities. It has upgraded its facilities and integrated advanced machinery to meet increased demand and enhance operational efficiency.


Control Environment

The Company has obtained quality certifications IS0-14001 and IS0-9001, demonstrating its emphasis on producing high-quality products.


Business Risk
Industry Dynamics

Pakistan's auto industry is a part of large scale manufacturing, accounting for ~73% of the overall value of manufacturing activities within the country. The industry is fairly fragmented with a large number of players. There are over ~2,000 Automotive Parts vendors in Pakistan, of which ~400 vendors belong to the Tier-1 category and are suppliers for the OEM market. The demand is primarily driven by auto sales and are met through OEMs, replacements and export markets; while, the remaining is met through imports. However, during FY24, production level and thus, sales of auto industry posted a decline, primarily due to import restrictions imposed by the SBP; encompassing essentials like CKD and SKD kits. Overall the sector’s margins remain sensitive to inflation, interest rates, and exchange rate.


Relative Position

Loads primarily generates sales from exhaust systems and dominates nearly 100% of market share with major OEMs.


Revenues

The Company derives revenue from the sale of auto parts including: exhaust systems (~59%), sheet metal components (~38%), and radiators (~3%) during FY24. During FY24, the Company witnessed a decline in revenue by ~0.1%, reported at ~PKR 4,940mln (FY23: ~PKR 4,944mln) due to decrease demand in the auto industry. During 1QFY25, the Company witnessed an increase in revenue by ~44.5%, reported at ~PKR 1,227mln (1QFY25: ~PKR 849mln) due to increased demand from OEMs. Going forward, the automobile industry is expected to witness an improvement.


Margins

Gross profit margin during FY24, clocked at ~19.6% (FY23: ~16.3%), due to a decline in manufacturing expenses. The effect trickled down to the operating margin which was reported at ~13.8% (FY23: ~10.5%). During FY24, the net profit margin witnessed a significant improvement reported at ~18.4% (FY23: ~ 27.9%) attributed to the gain on disposal of Korangi land and building. During 1QFY25, the Company reported a gross profit margin of 25.2% (1QFY24: ~18.5%) due to the trickle-down impact of increased revenue during the period. The increase in gross margin trickled down to net margin, reported at ~6.5% (1QFY24: ~1%).


Sustainability

Under current economic conditions, the Company's sustainability remains highly stretched as business and financial risks are elevated. Thus, a formal and materialistic business plan is required to revamp Loads' overall outlook. Any delay in managing the overall risks would impact the ratings. Hwever, sponsors technical and financial support provides comfort.


Financial Risk
Working capital

As of FY24, the net working capital days improved to ~95 days (FY23: ~130 days), primarily attributable to decreased inventory days (FY24: ~84 days, FY23: ~109 days) along with an uptick in trade payable days reported at ~38 days (FY23: ~33days). Trade receivable days declined to ~49 days (FY23: ~54 days). As of 1QFY25, net working capital days stood at ~89 days (1QFY24: ~125 days) due to a significant decrease in inventory days, indicating increased demand for the Company’s products. The Company holds a minimal borrowing cushion.


Coverages

As of FY24, Free Cash Flow from operations (FCFO) of the Company increased by ~29% and stood at ~PKR 432mln (FY23: 335mln), owing to profit before tax of ~PKR 257mln (FY24: ~(PKR 1,772mln)). This resulted in an improved FCFO/Finance cost coverage reported at ~1x (FY23: ~0.6x). As of 1QFY25, the Company reported FCFO of ~PKR 174mln (1QFY24: ~PKR 90mln), resulting in a coverage ratio of ~2.1x (1QFY24: ~0.5x).


Capitalization

As of FY24, the leveraging ratio stood at ~24% (FY23: ~44%), owing to ~48% reduction in short term borrowings as the Company is streamlining its working capital requirement through internal cashflows. While, total borrowings, including long term and short term borrowings, have reduced by ~47% and stood at ~PKR 1,235mln (FY23: ~PKR 2,312mln). Equity posted an uptick due to profit accumulation and stood at ~PKR 3,829mln (FY23: ~PKR 2,970mln). As of 1QFY25, the Company followed the similar trend and leveraging ratio stood at ~24% (1QFY24: ~41%). Shareholders’ equity increased by ~32%, reported at ~PKR 3,909mln (1QFY24: ~PKR 2,966mln), whereas total borrowings stood at ~PKR 1,236mln (1QFY24: 2,093mln).


 
 

Jan-25

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Sep-24
3M
Jun-24
12M
Jun-23
12M
Jun-22
12M
Management Audited Audited Audited
A. BALANCE SHEET
1. Non-Current Assets 1,922 1,931 1,348 584
2. Investments 12 12 1 1
3. Related Party Exposure 2,806 2,694 2,963 4,561
4. Current Assets 2,328 2,587 2,176 3,095
a. Inventories 775 968 1,054 1,619
b. Trade Receivables 739 772 425 909
5. Total Assets 7,068 7,224 6,487 8,241
6. Current Liabilities 976 1,319 921 893
a. Trade Payables 349 600 339 482
7. Borrowings 1,236 1,235 2,312 2,867
8. Related Party Exposure 887 805 255 143
9. Non-Current Liabilities 61 36 29 38
10. Net Assets 3,909 3,829 2,970 4,300
11. Shareholders' Equity 3,909 3,829 2,970 4,300
B. INCOME STATEMENT
1. Sales 1,227 4,490 4,494 7,792
a. Cost of Good Sold (918) (3,612) (3,761) (6,981)
2. Gross Profit 309 879 733 811
a. Operating Expenses (57) (257) (260) (259)
3. Operating Profit 252 621 473 552
a. Non Operating Income or (Expense) 12 236 (1,694) 232
4. Profit or (Loss) before Interest and Tax 264 857 (1,221) 784
a. Total Finance Cost (110) (600) (551) (313)
b. Taxation (75) 570 517 (204)
6. Net Income Or (Loss) 80 827 (1,256) 267
C. CASH FLOW STATEMENT
a. Free Cash Flows from Operations (FCFO) 174 432 335 260
b. Net Cash from Operating Activities before Working Capital Changes 89 (69) (152) (30)
c. Changes in Working Capital (169) 7 548 (296)
1. Net Cash provided by Operating Activities (80) (62) 395 (326)
2. Net Cash (Used in) or Available From Investing Activities (2) 1,391 (208) 154
3. Net Cash (Used in) or Available From Financing Activities 90 (618) (130) 844
4. Net Cash generated or (Used) during the period 8 711 58 672
D. RATIO ANALYSIS
1. Performance
a. Sales Growth (for the period) 9.3% -0.1% -42.3% 65.2%
b. Gross Profit Margin 25.2% 19.6% 16.3% 10.4%
c. Net Profit Margin 6.5% 18.4% -27.9% 3.4%
d. Cash Conversion Efficiency (FCFO adjusted for Working Capital/Sales) 0.4% 9.8% 19.6% -0.5%
e. Return on Equity [ Net Profit Margin * Asset Turnover * (Total Assets/Shareholders' Equity )] 8.2% 24.3% -34.5% 6.3%
2. Working Capital Management
a. Gross Working Capital (Average Days) 125 133 163 103
b. Net Working Capital (Average Days) 89 95 130 88
c. Current Ratio (Current Assets / Current Liabilities) 2.4 2.0 2.4 3.5
3. Coverages
a. EBITDA / Finance Cost 3.1 1.5 1.0 1.8
b. FCFO / Finance Cost+CMLTB+Excess STB 1.4 0.7 0.3 0.4
c. Debt Payback (Total Borrowings+Excess STB) / (FCFO-Finance Cost) 0.6 -20.4 -5.3 -18.1
4. Capital Structure
a. Total Borrowings / (Total Borrowings+Shareholders' Equity) 24.0% 24.4% 43.8% 41.2%
b. Interest or Markup Payable (Days) 50.6 47.6 73.1 64.1
c. Entity Average Borrowing Rate 22.8% 27.1% 20.2% 11.0%

Jan-25

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Jan-25

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Jan-25

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