M&P’s credit rating reaffirmed at ‘A+’ by VIS

September 10, 2024 (MLN): The VIS Credit Rating Company Limited (VIS) has reaffirmed the entity ratings of Muller & Phipps Pakistan (Pvt) Limited (M&P) at ‘A+’ for long-term and ‘A-1’ for short term with a stable future outlook, latest press release issued by VIS showed.

Long-term entity rating of ‘A+’ reflects good credit quality, and adequate protection factors.

Risk factors may vary with possible changes in the economy. Short-term rating of ‘A-1’ indicates strongest likelihood of timely repayment, with outstanding liquidity factors.

To note, the previous rating action was announced on June 14, 2023.

Muller & Phipps Pakistan Private Ltd. (M&P) boasts a long operational history exceeding a century in the logistics and distribution business.

As a leading national distributor, the Company offers comprehensive logistics and distribution services across Pakistan, including cold chain warehousing, sales, marketing, and after-sales support.

The business risk profile benefits from a diverse base of clientele and business segments, as well as established long-term relationships with top-tier corporates. Demand stability is supported by the pharmaceutical segment, which dominates the revenue mix.

The distribution industry however remains fragmented and competitive, leading to lower margins and limited pricing power, which is evident in contraction in the company’s margins.

Looking ahead, the company’s revenue is expected to grow further through increase in existing business portfolio and addition of new business partners across various sectors and a recovery in demand within the telecom sector.

Assigned ratings take into account the Company’s business updates; registering growth in sales by 19.1% during CY23 on the account of increase in sales volume from existing, addition of new businesses and renegotiation of margins resulting increase in gross margins to 7.1% for the same period.

Pharma Sector remained the largest contributor to total revenue followed by Consumer and Telecom sectors, while Healthcare sector was a marginal contributor to revenues.

Net margins remained under pressure at 0.3% in FY23 due to external factors such as increase in interest rates and higher taxation.

Assigned ratings also take into account the company’s financial risk profile; noting slight increase in equity base with retention of profits.

The company’s debt levels rose amid higher short-term borrowings during the period aligning with growth in business volumes requiring more working capital.

This has resulted in a higher gearing of 2.4x as of end-Dec’23. The company’s liquidity position remained satisfactory with a current ratio of 1.1x as of end-Dec’23.

However, moving forward, improvement in the Company’s cash flow coverage profile will remain an important indicator.

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