Lahore, June 27, 2019 (PPI-OT): The ratings reflect the Company’s association with Lotte Corporation, one of the biggest conglomerates in South Korea, and expected group support. Promising consumer sentiment in conjunction with higher production led to growth in revenues in the industry over the years. However, rising inflationary pressures and a stressed economy has curtailed this growth. Ratings draw strength from the Company’s established market presence in the snacks industry and experienced management team.
Utilization of the Company’s state-of-the-art ‘Choco pie’ plant remains low due to slow market pick of the product despite aggressive marketing campaigns. Meanwhile, margins have come under pressure recently owing increasing raw material costs, aggravated by rupee devaluation, and intense competition in the market resulting in operating loss. Efficient working capital management provides a breather to financial profile that is otherwise characterized by aggressive leveraging and stretched coverages. Here, timely support from the Group has materialized as per commitment. This would ensure timely payments of debt obligations.
The ratings are dependent on the Company’s ability to improve utilization of new plant, resulting in better margins, while maintaining working capital discipline. Any deterioration in margins and/or coverages will put pressure on the ratings. Continued support from Lotte Corporation, technically and financially, is critical for ratings.
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Analyst
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