VIS reaffirmed entity ratings of Madina Oil Refinery Ltd

June 25, 2025 (MLN): VIS Credit Rating Company Limited (‘VIS’) has reaffirmed the entity ratings of Madina Oil Refinery Limited (MORL) at 'BBB/A2' (‘Triple B /A Two’).

Medium to long term rating of 'BBB' indicates adequate credit quality; protection factors are reasonable and sufficient.

Risk factors are considered variable if changes occur in the economy.

Short-term rating of 'A2' indicates good likelihood of timely repayment of short-term obligations with sound short-term liquidity factors.

Risk factors are small. Outlook on the assigned rating is ‘Stable’.

Previous rating action was announced on April 09, 2024.

MORL was incorporated in Pakistan in 2020 as a private limited company under the Companies Act, 2017 and later on converted into public unlisted company in 2021.

The registered office of the Company is situated in the province of Sindh, while the head office and the factory are located in Faisalabad.

The principal activity of the Company is manufacturing and sale of banaspati ghee, cooking oil, and byproducts.

MORL also has associated concern namely “Madina Sugar Mills Ltd” in which it holds 12.62% stake.

For FY24, Kreston Hyder Bhimji & Co has been appointed as external auditors of the Company.

Assigned ratings reflect high business risk of the edible oil industry, due to its dependence on imported products, a lag in pass-through of costs to consumers, and the dominance of major players, making pricing control a challenge for smaller entities.

In FY24, the Company’s topline remained on the lower side due to a decline in both volumetric sales and price, coupled with a conservative procurement strategy amid high international palm oil price volatility and potential inventory losses.

Given lower sales and similar level of net margins, net profit decreased during FY24.

The short-term borrowings declined due to lower working capital requirements, which coupled with higher equity base, led to improvement in leverage ratios.

Coverages remained sound. Given low coverage of short-term debt through trade receivables and inventory, the liquidity profile remained somewhat stressed.

Going forward, improvement in liquidity indicators while maintaining overall financial profile will be important from the ratings perspective.

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