JCR-VIS Credit Rating Company Limited (JCR-VIS) has upgraded the medium to long-term rating of Coronet Foods (Pvt) Ltd (CFL) from A (Single A) to A+ (Single A Plus) with 'Stable' outlook. The short-term rating is A-1 (A One). CFL is a wholly owned subsidiary of English Biscuit Manufacturers (Pvt) Ltd (EBM), marketing the Peek Freans brand of biscuits in Pakistan. The upgrade takes into consideration the substantial improvement in cash flows in comparison to the projection, which is expected to be sustained while the company operates at very low debt leverage.
The improvement in cash flows was brought about by the high growth in sales volume with increased capacity utilisation supported by new product introduction and innovations, marketing efforts, price stability despite inflationary environment and sustained high quality of the products.
The company thus managed to offset the expected impact on bottom-line profitability from the reduction in cash margins and incidence of tax for the first time since incorporation and sustain the high cash generation stream.
The liquidity position of CFL remains strong, as not only the company met the increased working capital requirements from operational cash flows, it also effectively eliminated the gearing and provided funding to EBM as well. Going forward, gearing is expected to remain low in view of the considerable annual cash flows stream in comparison to the future capital expenditure plans of the company.
The ongoing implementation of an Enterprise Resource Planning system will also facilitate the effectiveness of the decision-making process generating critical information about the operations.
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