The Pakistan Credit Rating Agency Limited
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Ayesha Malik

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PACRA Maintains Entity Ratings of Popular Sugar Mills Limited

Rating Type Entity
Action Maintain Maintain
Long Term BBB+ BBB+
Short Term A2 A2
Outlook Stable Stable
Rating Watch - -

The sugar industry of Pakistan has remained under pressure in recent times. A persistent supply glut negatively impacted players across the industry. Additionally, slowdown in international sugar prices rendered domestically manufactured sugar uncompetitive, making exports viable only through subsidy support. However, prices during the current season (MY19) have improved owing to lower sugar production and depletion of carryover stock. This has impacted profitability for industry players positively. Moreover, retirement of subsidy amount due by the government has eased the liquidity pressure to an extent.

The ratings reflect Popular Sugar Mills Limited’s adequate business profile. The Company has depicted stability in margins whilst maintaining a positive trend in revenues during challenging market dynamics. The Company’s profitability is supported through sale of by-products. Mismatch in the debt mix persisted as the Company increased the short term borrowings. Leveraging increased in Jun '19 while, having weak coverages. The rating incorporates group support for the entity if the need arises.
Ratings are dependent on the Company’s ability to maintain margins while implementing strict working capital discipline. Continued efforts to realign the debt mix are critical for ratings. Any material deterioration in coverages and/or margins will negatively impact ratings.

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 8,000 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’). Around 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.