The Pakistan Credit Rating Agency Limited
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Faiqa Qamar

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PACRA Maintains Entity Ratings of Popular Sugar Mills Limited

Rating Type Entity
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.

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.