PACRA Maintains Entity Ratings of Premier Industrial Chemical MFG. Co. (Pvt.) Limited

Premier Industrial Chemical MFG. Co. (Pvt.) Limited ("the Company") maintains a satisfactory market position, supported by a strong financial foundation and a prominent role in Pakistan’s ethanol export segment, underpinned by its sizeable production capacity. The Company operates across two primary business segments—ethanol and juice & dairy—contributing ~83% and ~17% to total revenue, respectively. The Company is exposed to market risks, primarily stemming from fluctuations in sugarcane yield and quality, which are influenced by agronomic conditions and cyclical variations in crop production. Additionally, volatility in raw material prices, particularly molasses, heightens operational uncertainty, necessitating robust supply chain and cost controls. Global ethanol prices have remained suppressed amid macroeconomic uncertainty, exerting downward pressure on the Company’s profitability. This impact has been compounded by adverse exchange rate movements. Operational challenges were further intensified by the divergence between market-driven sugarcane prices and government-fixed rates. However, the government's move towards deregulated sugarcane pricing is expected to lower the cost of goods sold, as market-based pricing encourages operational efficiency. However, this shift may introduce risks that could discourage farmers from cultivating sugarcane. Industry-wide, sugarcane production declined to 84.2 million MT in MY25 (MY24: 87.6 million MT), driven by below-average rainfall. Weaker yields and lower recovery rates resulted in a subdued crushing season, reducing national sugar output to 6.3 million MT from 6.8 million MT YoY. Consequently, reduced molasses availability adversely affected the Company. Despite these challenges, ethanol production increased to 69,591 MT in CY24 (CY23: 56,483 MT), with capacity utilization improving to ~56% (CY23: ~46%). To address molasses supply constraints and improve utilization, the Company is executing a forward-looking strategy by developing a new ethanol production facility utilizing corn-based molasses. However, profitability declined significantly in CY24, with gross profit margin contracting to 9.5% (CY23: 33.3%), primarily due to elevated raw material costs and reduced sugarcane availability, which outpaced revenue growth. This margin compression led to a negative net profit margin of -2.8% (CY23: 21.9%). Despite the decline in profitability, the Company maintained a moderately leveraged capital structure. Working capital management remained effective, while a robust equity base and demonstrated sponsor support continue to underpin the Company’s financial stability and rating profile.
Ratings are dependent on the management’s ability to effectively sustain the improved volumes and margins. Prudent debt and liquidity management is critical for ratings. Any deterioration in coverages and/or drag of high advances extended to group concerns, if any, will adversely impact the ratings. Meanwhile, strengthening governance framework remains imperative for ratings.

About the Entity
Premier Industrial Chemical Manufacturing Co. (Private) Limited (‘the Company’) was incorporated in Jun-03 as a private limited company. The Company is primarily engaged in the manufacturing and sale of food grade ethanol, dairy products, and juices. Total annual production capacity is 124,000 M. Tons with Superfine Ethanol of 96% strength and Fuel grade Ethanol of 99.9% strength comprising of 50,000MT each. The Company is completely owned by the sponsoring family. Mr. Muhammad Saeed, the Chief Executive Officer and Chairman of the Board, and has been associated with the Company since inception. Director, Mr. Shahid Saeed, heads the Company’s dairy and juices segment.