Analyst
Ayesha Qasim
ayesha.qasim@pacra.com
+92-42-35869504
www.pacra.com
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PACRA Maintains Entity Ratings of Al-Abbas Sugar Mills Limited
Rating Type | Entity | |
Current (30-Mar-17 ) |
Previous (31-Mar-16 ) |
|
Action | Maintain | Maintain |
Long Term | A | A |
Short Term | A1 | A1 |
Outlook | Stable | Stable |
Rating Watch | - | - |
The ratings recognize significant positioning of Al-Abbas in its core business segments - sugar and ethanol. With better efficiencies in its operations and by diversifying its revenue streams, Al Abbas has been able to fortify its position in the market and cope up with volatility in sugar prices. While sugar is characterized by stable demand supported by fundamentals, ethanol takes benefit of the value addition that it signifies as a product. Although margins are thin in sugar due to structure of domestic industry and softening of commodities in international markets, revenues of ethanol division support profitability. The company has also built a storage terminal at port; this provides stable rental income. The ratings take comfort from the completely deleveraged balance sheet (from long term loans perspective) of the company, providing a strong financial profile. However, working capital requirements during crushing season lead to sizable borrowings. Nevertheless, adequate cashflows and largely stable coverages provide relief to it.
The ratings are dependent on the sustained risk profile of the company. Herein, business volumes and related margins are important. Strategic plan regarding asset build up (expansion and/or diversification) and related leveraging need to be drawn. This may impact the ratings accordingly.
About
the Entity
Al-Abbas Sugar Mills limited, listed on the Pakistan Stock Exchange (PSX), was incorporated in May 1991. Haji Ghani Group (HG) through family and associates own majority shareholding (58%) in Al-Abbas and exercise management control. Jahangir Siddiqui (JS) group (27%) is the other major shareholder. There are certain lawsuits between the two groups that are pending adjudication. The business include a) Sugar capacity of 7,500 M. tons per day, b) Ethanol-capacity 172,500 liters per day, and c) Storage tank terminal-capacity of 22,850 M. tons per month.
Al-Abbas BoD, including CEO, comprises nine members. Six members represent HG and associates, two representative of JS group and one independent director. Mr. Shunaid Qureshi, the CEO since inception, played critical role in development of company. However, he is gradually limiting himself to strategic decisions while Mr. Asim Ghani, an executive director and Ghani family member, has an increasing role in operational management. The executives are supported by a core team of dynamic and experienced professionals.