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The Pakistan Credit Rating Agency Limited
Press Release

Date
17-Mar-23

Analyst
Faiqa Qamar
faiqa.qamar@pacra.com
+92-42-35869504
www.pacra.com

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This press release is being transmitted for the sole purpose of dissemination through print/electronic media. The press release may be used in full or in part without changing the meaning or context thereof with due credit to PACRA

PACRA Maintains Entity Ratings of Unicol Limited

Rating Type Entity
Current
(17-Mar-23 )
Previous
(18-Mar-22 )
Action Maintain Maintain
Long Term A A
Short Term A1 A1
Outlook Stable Stable
Rating Watch - -

Pakistan’s ethanol industry is largely export based owing to meager domestic consumption. The Country’s ethanol exports witnessed ~10% during MY22 from 353,937MT during MY21 due to higher molasses production and better recovery. Prices in the global market have been high, on the back of spike in ethanol demand, despite unsteady economic conditions worldwide. Impact of high international ethanol prices was supplemented by devaluation of the Pakistani Rupee. Sugarcane production in Pakistan during MY22 improved, as domestic distilleries posted stable profits. Going forward, the ethanol industry's margins are expected to remain stable owing to increased ethanol prices, though raw material cost has also increased in the current sugar crushing season (MY23).
The ratings reflect Unicol Limited's strong business profile emanating from strong and stable margins, and the export-oriented nature of the ethanol industry. Additionally, the ratings draw strength from the Company’s association with three strong business Groups: Ghulam Faruque Group, Amin Bawany Group, and Hasham Group. Robust clientele provides and edge in the export market. Unicol has been able to enhance its efficiency through consistently investing in BMR. This has yielded positive results while augmenting the turnover, posting a growth of 6.4% during MY22. This, along with substantial increase in the profitability braces the Company's overall financial performance. The Company has an adequately leveraged capital structure supplemented by strong coverages and healthy working capital cycle. This kept the financial risk moderate. Strong governance framework and management practices bodes well for the Company's ratings.
The ratings are dependent on the Company's ability to sustain its margins and healthy coverages while maintaining the necessary cushion and discipline in working capital management. Amicably sustaining the relationship among shareholders remains crucial for the ratings. Significant deterioration in coverages will have a negative impact on ratings.

About the Entity
Unicol Limited ('Unicol' or 'the Company') was incorporated in 2003 as a public unlisted company. The Company's formal operations begun in 2007 and since then its primarily involved in the manufacturing and sale of ethanol and liquid carbon dioxide (LCo2). The Company has an annual installed capacity to produce 56,000MT of ethanol; while, LCo2 is produced at an annual installed capacity of 18,000MT.
Unicol is a joint venture among three public listed sugar mills: Faran Sugar Mills Ltd., Mehran Sugar Mills Ltd., and Mirpurkhas Sugar Mills Ltd., each holding an equal stake of ~33.33%. The sponsoring companies are parts of three established business Groups: Ghulam Faruque Group - has an established presence in cement, packaging, sugar, construction related segments, and renewable energy, Amin Bawany Group - having stable footings in sugar and consumer goods segments and Hasham Group - has progressed in the sugar segment. The Company's Board is chaired by Mr. Asif Qadir. Mr. Aslam Faruque heads the Company as the Chief Executive Officer. He is supported by a team of experienced professionals.

The primary function of PACRA is to evaluate the capacity and willingness of an entity to honor its obligations. Our ratings reflect an independent, professional and impartial assessment of the risks associated with a particular instrument or an entity. PACRA's comprehensive offerings include instrument and entity credit ratings, insurer financial strength ratings, fund ratings, asset manager ratings and real estate gradings. PACRA opinion is not a recommendation to purchase, sell or hold a security, in as much as it does not comment on the security's market price or suitability for a particular investor.