Loads Limited

CREDIT RATING REPORT | Mar-25

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Rating History
Dissemination Date Long-Term Rating Short-Term Rating Outlook Action Rating Watch
11-Mar-25 A A1 Stable Maintain -
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 -
About the Entity

Loads Limited ('Loads' or 'the Company') was established in 1979 as a private limited company and was 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 BoD; while, Mr. Mohtashim Aftab heads the Company as the CEO. They are assisted by team of experienced professionals.

Rating Rationale

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). Earlier persistent economic instability, inflationary pressures, and exchange rate fluctuations had impacted the Company's overall performance. Pakistan's auto industry is fairly fragmented. The demand is primarily driven by auto sales and is met through OEMs, replacements, and export markets; while the remaining is met through imports. During FY24, production level and, thus, sales of the auto industry posted a decline, primarily due to import restrictions imposed by the SBP. Lately, as the sector's overall outlook has begun to stabilize, Loads management has diversified its revenue-generating avenues, i.e. a mix of OEMs, replacement/aftermarket (RM) sales, along with identifying and catering to export orders. This, along with a reduced quantum of debt on the balance sheet, gives a breather. In the meantime, technical and financial support from the Group - Treet Corporation - adds the requisite respite, thus providing comfort to the ratings. On the Group level, a considerable revamp in the overall financial position and performance is also visible and adds cushion. The Company's business risk profile, including margins, is gradually picking up; thus supporting the Company's overall performance. Earlier, the Company had to impair the investment in its subsidiary company, Hi-Tech Alloy Wheel Limited ('Hi-Tech'), as its commissioning was considerably delayed due to economic uncertainty and a downturn in the auto sector. Lately, cautious cost control efforts have revived the Company's profits. This, along with the management's stringent efforts to sell the asset (Hi-Tech), is expected to bring in substantial liquidity. The Company had working capital-related challenges and a declining equity base. However, the ongoing efforts are expected to stabilize the otherwise weak financial risk profile. The Company seems fairly able to timely and successfully materialize the envisioned initiatives; this remains imperative to the ratings. A strong governance framework and managerial practices are beneficial.

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 a challenging industry environment are pertinent. Moreover, prudent management of financial affairs remains important.

REPORT CONTENTS
  1. Rating Analysis
  2. Financial Summary
  3. Rating Scale
  4. Regulatory Disclosure

Loads Limited

rating analysis

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Profile
Legal Structure

Loads Limited ('Loads' or 'the Company') was incorporated on 01-Jan-79 as a private limited company. The Company was listed on the 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 and 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, has more than four decades of experience and has been 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. The Head of Finance, IT, and Import reports to the 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 committee, 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 has over three decades of experience. He has been 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 use 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 is 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 SBP; encompassing essentials like CKD and SKD kits. Overall, the sector’s margins remain sensitive to inflation, interest, and exchange rates.


Relative Position

Loads primarily generate sales from exhaust systems and dominate nearly ~100% of the 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, the Company witnessed a decline in revenue by ~0.1%, reported at ~PKR 4,940mln (FY23: ~PKR 4,944mln) due to decreased demand in the auto industry. During FY25, demand from the automobile industry is expected to witness an improvement, resulting in enhanced Company revenue.


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%). 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 FY25, margins are expected to improve, reaping cost efficiency benefits.


Sustainability

The Company has devised a formal business plan to revamp Loads sustainability issues. Successful implementation of these plans remains imperative to ratings. Moreover, 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). The Company is making efforts to manage its working capital cycle well to create a stable borrowing cushion as of FY25.


Coverages

As of FY24, the EBITDA of the Company increased by ~29% and stood at ~PKR 667mln (FY23: 516mln), owing to profit before tax of ~PKR 257mln (FY24: ~(PKR 1,772mln)). This resulted in an improved EBITDA/Finance cost coverage reported at ~1.5x (FY23: ~1x). The Company envisions to improve the debt cover, going forward.


Capitalization

As of FY24, the leveraging ratio stood at ~24% (FY23: ~44%), owing to a ~48% reduction in short-term borrowings as the Company is streamlining its working capital requirement through internal cash flows. 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). The Company is expected to follow the same trajectory with stable leveraging as of FY25.
 
 

Mar-25

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Loads Limited

financial summary

(PKR mln)

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Dec-24
6M		 Jun-24
12M		 Jun-23
12M		 Jun-22
12M
Management Audited Audited Audited
A. BALANCE SHEET
1. Non-Current Assets 2,053 1,931 1,348 584
2. Investments 13 12 1 1
3. Related Party Exposure 2,960 2,694 2,963 4,561
4. Current Assets 2,047 2,587 2,176 3,095
a. Inventories 650 968 1,054 1,619
b. Trade Receivables 568 772 425 909
5. Total Assets 7,073 7,224 6,487 8,241
6. Current Liabilities 1,085 1,319 921 893
a. Trade Payables 469 600 339 482
7. Borrowings 995 1,235 2,312 2,867
8. Related Party Exposure 927 805 255 143
9. Non-Current Liabilities 35 36 29 38
10. Net Assets 4,031 3,829 2,970 4,300
11. Shareholders' Equity 4,031 3,829 2,970 4,300
B. INCOME STATEMENT
1. Sales 2,799 4,490 4,494 7,792
a. Cost of Good Sold (2,173) (3,612) (3,761) (6,981)
2. Gross Profit 626 879 733 811
a. Operating Expenses (166) (257) (260) (259)
3. Operating Profit 460 621 473 552
a. Non Operating Income or (Expense) 72 236 (1,694) 232
4. Profit or (Loss) before Interest and Tax 532 857 (1,221) 784
a. Total Finance Cost (212) (600) (551) (313)
b. Taxation (119) 570 517 (204)
6. Net Income Or (Loss) 202 827 (1,256) 267
C. CASH FLOW STATEMENT
a. Free Cash Flows from Operations (FCFO) 262 432 335 260
b. Net Cash from Operating Activities before Working Capital Changes 120 (69) (152) (30)
c. Changes in Working Capital 212 7 548 (296)
1. Net Cash provided by Operating Activities 332 (62) 395 (326)
2. Net Cash (Used in) or Available From Investing Activities 25 1,391 (208) 154
3. Net Cash (Used in) or Available From Financing Activities (244) (618) (130) 844
4. Net Cash generated or (Used) during the period 113 711 58 672
D. RATIO ANALYSIS
1. Performance
a. Sales Growth (for the period) 24.7% -0.1% -42.3% 65.2%
b. Gross Profit Margin 22.4% 19.6% 16.3% 10.4%
c. Net Profit Margin 7.2% 18.4% -27.9% 3.4%
d. Cash Conversion Efficiency (FCFO adjusted for Working Capital/Sales) 16.9% 9.8% 19.6% -0.5%
e. Return on Equity [ Net Profit Margin * Asset Turnover * (Total Assets/Shareholders' Equity )] 10.3% 24.3% -34.5% 6.3%
2. Working Capital Management
a. Gross Working Capital (Average Days) 100 133 163 103
b. Net Working Capital (Average Days) 65 95 130 88
c. Current Ratio (Current Assets / Current Liabilities) 1.9 2.0 2.4 3.5
3. Coverages
a. EBITDA / Finance Cost 2.9 1.5 1.0 1.8
b. FCFO / Finance Cost+CMLTB+Excess STB 1.2 0.7 0.3 0.4
c. Debt Payback (Total Borrowings+Excess STB) / (FCFO-Finance Cost) 0.8 -20.4 -5.3 -18.1
4. Capital Structure
a. Total Borrowings / (Total Borrowings+Shareholders' Equity) 19.8% 24.4% 43.8% 41.2%
b. Interest or Markup Payable (Days) 32.2 47.6 73.1 64.1
c. Entity Average Borrowing Rate 26.0% 27.1% 20.2% 11.0%

Mar-25

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Loads Limited

rating scale

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Mar-25

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Loads Limited

regulatory disclosure

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  1. Rating Team Statements
    1. Rating is just an opinion about the creditworthiness of the entity and does not constitute a recommendation to buy, hold, or sell any security of the entity rated or to buy, hold, or sell the security rated, as the case may be. (Chapter III; 14-3-(x))
    2. Conflict of Interest
      1. The Rating Team or any of their family members have no interest in this rating (Chapter III; 12-2-(j))
      2. PACRA, the analysts involved in the rating process, and members of its rating committee and their family members do not have any conflict of interest relating to the rating done by them (Chapter III; 12-2-(e) & (k))
      3. The analyst is not a substantial shareholder of the customer being rated by PACRA [Annexure F; d-(ii)]
      4. Explanation: for the purpose of the above clause, the term "family members" shall include only those family members who are dependent on the analyst and members of the rating committee.
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  3. Conduct of Business
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Mar-25

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