Premier Industrial Chemical Manufacturing Co. (Private) Limited (‘the Company’) was incorporated in Jun-03 as a private limited company.

Premier Group of Industries (‘the Group’) consists of companies operating in the ethanol, paper, and steel sectors. The Group, founded by Sheikh Zahoor Ali (late), started its operations in 1979 with a paper mill. Over the years the second generation of the business diversified the operations by venturing into ethanol and steel segments. The Company was formed in 2003 and started operations in 2007 mainly producing industrial grade ethanol. In 2012, the dairy and juices plant were also added for manufacturing nectar juices, flavored milk, and butter.

The Company is primarily engaged in the manufacturing and sale of industrial grade ethanol, dairy products and juices. Total Annual production capacity is 124,000 M. Tons with with Superfine Ethanol of 96% strength and Fuel grade Ethanol of 99.9%. In CY24, the Company produced 69,591 MT of ethanol (CY23: 56,483MT) resulting increase in capacity utilization of ~55.9% (CY23: 45%). Total power generation stands at 15MW and the Company’s own consumption is 5 MW and surplus is available for the steel plant at commercial rate.

The Company is completely owned by the sponsoring family. Majority shareholding rests with Mr. Zahoor’s sons, Mr. Muhammad Saeed (~20.8%), Mr. Shahid Saeed (~20.8%), and Mr. Tahir Saeed (~20.8%). The remaining shareholding rests with Mrs. Zahra Tahir (~12.5%), Mrs. Nagma Tahir (~12.5%), and Mr. Muhammad Saeed’s sons, Mr. Ahsen Ali (~5.5%), Mr. Asad Ali (~5.5%), and Mr. Turab Ali (~1.50%).

The ownership structure is seen as stable. However, formal succession plan further enhances the stability of the structure.

Sponsors are considered to have adequate business acumen through its group. The Group has vested business interest in the industries of ethanol, paper and steel.

The Company has adequate financial strength derived from its Group and support of sponsors.

Board of Directors comprises five members including the Chairman, who is also the CEO, and four Executive-Directors. The board is dominated by the sponsoring family and lacks independent oversight indicating room for improvement.

Mr. Muhammad Saeed, acts as the Chairman of the Board. He has over 32 years of industrial experience in Paper and Ethanol sectors and has been associated with the Company since inception.

Board meetings are conducted on need-basis. The Board lacks any sub-committees.

External Auditors of the Company, Crowe Hussain Chaudhary & Co. Chartered Accountants have expressed an unqualified opinion on financial statements for CY24. The firm has been categorized in category ‘A’ by SBP and has been QCR rated by ICAP.

The Company’s organizational structure has been optimized as per the operations. The Company operates through Finance, Sales & Marketing, Production, and Admin & HR. The functions of finance and production are headed by Directors along with departmental heads. Ultimate reporting lines rest with the CEO, who makes pertinent decisions of the Company.

The Company’s management comprises experienced and qualified individuals. Mr. Muhammad Saeed, the Chief Executive Officer, is a graduate and has been associated with the Company since inception. He has more than 32 years of experience in the ethanol and paper segments. Director, Mr. Shahid Saeed, has over 27 years of experience in the paper and juices sectors and heads the Company’s dairy and juices segment.

The Company has no management committees in place. However, performance is discussed among management on a frequent basis to review activity.

The Company has deployed ERP software from Cosmosoft. Reports are generated on daily basis for the management.

The Company has outsourced its internal audit function to Saim & Co. Chartered Accountants.

Pakistan’s sugar industry, the country’s second-largest agro-based sector with approximately 90 mills and an annual crushing capacity of 80–90 million metric tons, continues to face structural challenges—chiefly the government-mandated sugarcane support prices, which are based on farmers' input costs and often compress millers’ margins.  In MY25, sugarcane production declined to 84.2 million metric tons from 87.6 million metric tons in MY24, primarily due to below-average rainfall. Lower yields and weak recovery rates resulted in a subdued crushing season, reducing sugar production to 6.3 million metric tons from 6.8 million metric tons in the previous year. Opening stocks for MY25 stood at 1.4 million metric tons, of which 0.8 million metric tons were approved for export. Domestic consumption rose to 6.6 million metric tons, creating a supply-demand imbalance exacerbated by export volumes and reduced output, leading to a sharp increase in sugar prices.  To curb market volatility, the federal government authorized the import of 500,000 metric tons of sugar. The Trading Corporation of Pakistan (TCP) had already accepted bids for 200,000 tons at USD 580–586 per ton, equating to approximately PKR 165/kg.  Looking ahead, sugarcane output in MY26 is expected to recover, driven by improved water availability following floods and heavy rainfall in Punjab.

The company's rated capacity for ethanol is among the highest in the country, giving it a significant competitive advantage in this specific sector. This specialization makes it a key player in Pakistan's ethanol export segment, which is a major contributor to the country's chemical exports. Furthermore, the company is actively pursuing strategies to augment its market share, evident in the commendable improvements in capacity utilization. In addition to these efforts, the company is in the process of incorporating corn-based molasses into its operations. This strategic move is expected to bolster its market position and enhance profitability, given the anticipated cost advantages associated with corn-based molasses.

In CY24, the company's total revenue declined by 12.1% to PKR 16,655mln from PKR 18,951mln in CY23. This decrease was primarily driven by lower sales in both domestic and international markets. The company's operational strategy is heavily reliant on international markets, which account for approximately 81% of its total revenue, with the remaining 19% coming from local sales. The revenue of the Company is split between two segments; The dairy and juice segment and the ethanol segment. The dairy and juice segment also experienced a decline, with gross sales decreasing by 8.7% to PKR 2,886mln from PKR 3,162mln in the previous year. This indicates that the challenges faced by the company are not isolated to a single product category but are more widespread across its portfolio. The revenue from ethanol segment also declined by 12.8% and stood at PKR~13,768mln during CY24 (CY23: PKR ~15,788mln). A key factor contributing to this was a decrease in sugarcane production. The significant drop in overall revenue, coupled with the decline in the key dairy and juice segment, suggests a need to re-evaluate market strategies and potentially address factors impacting demand in both domestic and international markets.

The company's profitability saw a significant decline during CY24, with gross profit margin plummeting to 9.5% from 33.3% in the previous year. This substantial contraction was primarily driven by a sharp increase in the cost of goods sold (COGS), which rose to PKR 12,982mln from PKR 10,223mln. This increase in COGS is attributed mainly to a rise in raw material costs of molasses and decreased production of sugarcane, which significantly outpaced revenue growth. The compression in gross margins had a cascading effect on the company's overall profitability. The net profit margin turned negative, standing at -2.8% compared to 21.9% during CY23. Furthermore, the company's financial health was challenged by a significant rise in finance costs, which climbed to PKR 966mln from PKR 689mln. This increase in borrowing costs, coupled with the decline in operational profitability, has put considerable pressure on the company's bottom line. The combination of falling revenues, rising raw material and operational costs, and higher finance expenses points to a need for a comprehensive review of the company's cost management and pricing strategies to restore profitability.

The Company intends to enhance its utilization and is exploring alternatives to sugar-cane based molasses, such as corn-based ethanol, to achieve its targets. Letters of Credit (LCs) for the imported machinery have been approved. The corn-based ethanol plant is anticipated to become operational in the near future.

The company significantly improved its working capital management during CY24, demonstrating enhanced efficiency across several key metrics. The gross working capital days improved, decreasing from 42 days during CY23 to 38 days in CY24. This was primarily driven by a substantial reduction in inventory days, which dropped to 38 days from 42 days, reflecting more efficient inventory turnover. This improvement was further supported by a reduction in finished goods days from 6 to 2 days, indicating a quicker conversion of inventory into sales. These operational efficiencies, combined with stable trade payable days (remaining at 3 days), led to a significant improvement in the company's liquidity position. The net working capital days decreased considerably from 39 days during CY23 to 35 days in CY24. This reduction indicates a more optimized cash conversion cycle and an improved ability to meet short-term obligations. These strategic enhancements in working capital management suggest a stronger focus on operational efficiency and a healthier financial position, which is particularly crucial given the company's recent challenges with profitability and revenue decline. The improved working capital metrics provide a positive counterpoint to the negative trends seen in the company's income statement.

The company's ability to service its debt obligations weakened considerably in CY24, as evidenced by a sharp decline in its interest coverage ratio to 0.9x from 8.2x in the previous year. An interest coverage ratio below 1.0x indicates that the company's earnings before interest and taxes (EBIT) are insufficient to cover its interest expenses. This deterioration is a result of two key factors: a dramatic decrease in funds from continuing operations (FCFO) and a simultaneous increase in finance costs. FCFO plummeted to PKR 438mln in CY24, a significant drop from PKR 5,059mln during CY23. This decline suggests a severe contraction in cash generated from core business activities. Concurrently, finance costs rose to PKR 966mln from PKR 689mln, further straining the company's financial resources. The combination of dwindling operational cash flow and rising debt obligations presents a challenge to the company's financial stability. The company's diminished capacity to cover its interest payments signals heightened credit risk and may limit its ability to secure future financing on favorable terms. A strategic review of debt management and operational efficiency is crucial to reverse this negative trend and restore a healthy interest coverage ratio. Lower interest rates from 24% signal improved financial health.

The company maintained a moderately leveraged capital structure in CY2024, with its debt-toequity ratio improving to 29.8% from 36.2% in the prior year. This reduction was primarily due to a decrease in total debt, which fell to PKR 5,424 million from PKR 7,510 million. While the improved leverage ratio is a positive development, a key concern lies in the composition of this debt. A significant characteristic of the company's debt profile is its heavy reliance on short-term borrowings, which constitute approximately 97.5% of total debt. This high concentration of shortterm debt, primarily comprised of facilities like the ERF-Part II and running finance for working capital, exposes the company to considerable liquidity and refinancing risks. The dependence on these short-term instruments means the company must continuously manage upcoming maturities and is highly vulnerable to fluctuations in short-term credit markets. Despite the reduction in the overall leverage ratio, the company's financial stability remains contingent on its ability to effectively manage its short-term debt obligations. The current capital structure necessitates vigilant monitoring of liquidity and cash flow to ensure the company can meet its financial commitments, especially in a volatile economic environment. Looking ahead, maintaining this stability will be crucial for the company's long-term financial health.