The Pakistan Credit Rating Agency Limited
31-Oct-18
Analyst
Ayesha Qasim
ayesha.qasim@pacra.com
+92-42-35869504
www.pacra.com
Applicable Criteria
- Methodology | Corporate Ratings | Jun-18
- Methodology | Correlation Between Long-Term And Short-Term Rating Scale | Jun-18
Related Research
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PACRA Maintains Entity Ratings of Popular Sugar Mills Limited
| Rating Type | Entity | |
|
Current (31-Oct-18 ) |
Previous (02-May-18 ) |
|
| Action | Maintain | Initial |
| Long Term | BBB+ | BBB+ |
| Short Term | A2 | A2 |
| Outlook | Stable | Stable |
| Rating Watch | - | - |
Pakistan is the 6th largest sugarcane producer, 9th largest sugar producer and 8th largest sugar consuming country in the world. Sugarcane is grown on approximately 1.2mln hectares. The industry witnessed surplus sugar production during FY17, which resulted in depressed prices and a significant pile up of sugar stocks at end Sept-17. Sugar production decreased to 6.5mln tons during FY18 in comparison to 7mln tons in FY17. The over supply situation persisted in FY18 and prices remained under pressure.
The ratings reflects the adequate business profile of Popular Sugar Mills Limited. During FY18, the Company has managed to maintain its margins accompanied by an increase in turnover despite depressed sugar prices. The Company intends to improve its debt mix, which remains skewed towards short-term borrowings, by obtaining long term loans. The Company's modest leveraging and improving core coverages provide comfort to it's financial risk profile.
The ratings are dependent upon the Company's ability to increase its revenue base while maintaing margins and strict financial discipline/coverages. Continued efforts to realign the debt mix are critical for ratings. Any material deterioration in coverages and/or margins will have negative rating implications.
About
the Entity
Popular Sugar Mills Limited is a public limited company. Popular Sugar Mills acquired 100% shareholding of National Sugar Industries Limited in 2013. The Company operates a unit located at Jan Muhammad Wala, near Sargodha, having a crushing capacity of 8000 tons per day. The Company is engaged in manufacturing and sale of refined sugar and its by-products; molasses and bagasse.
Popular Sugar Mills is a wholly owned company of the Popular Group of Industries (‘Popular Group’). 87% of the shares reside with other Group companies. While, remaining 13% of the stake vests with the individuals of Roshan and Malik family.