PACRA Maintains Entity Ratings of Mehran Sugar Mills Limited

The assigned ratings continue to reflect Mehran Sugar Mills Limited’s (MSML) established market position and its strong sponsorship profile through the Hasham Group. During the period, the industry underwent a structural shift as provincial governments moved toward a market-driven pricing mechanism for sugarcane, withholding traditional support price notifications. While this deregulation introduces potential volatility, it allows MSML to align procurement costs with market supply-demand dynamics, fostering greater operational efficiency. However, the Company remains exposed to inherent agricultural risks, including fluctuations in sugarcane yield and sucrose recovery rates influenced by climatic conditions. Management’s ability to navigate this deregulated landscape through proactive supply chain and cost management remains a key rating driver.
On the financial front, MSML demonstrated a sharp turnaround in MY25, characterized by a return to profitability and strengthened cash flow generation. The Company’s topline grew by ~23.5% to PKR 13.57bln, supported by improved price realizations and effective inventory management. Gross margins recovered significantly to ~14.8% (MY24: ~8.1%), reflecting the transition to a more manageable procurement environment and higher selling prices. Net profitability was further bolstered by a doubling of other income to PKR 1.83bln—primarily from capital gains in the short-term investment portfolio—and a substantial reduction in finance costs as monetary policy began to ease. The financial risk profile is deemed moderate, supported by improved debt coverage ratios and a conservative capital structure. Working capital remains reliant on short-term borrowings in line with industry cycles. The restoration of dividends (PKR 5.50/share) underscores management’s confidence in the Company’s liquidity profile and future fiscal trajectory
The company's credit ratings are predicated on its ability to fortify business margins, sustain robust cash flows, and uphold financial coverages through unwavering financial discipline. An intensified commitment to the meticulous management of working capital is paramount. Any substantive erosion in margins and/or financial coverages would precipitate an adverse recalibration of the company's credit ratings.

About the Entity
Mehran Sugar Mills Limited is principally engaged in the manufacturing and commercialization of sugar and related by-products. The enterprise boasts a daily sugarcane processing capability of 12,500 metric tons. The Hasham Family holds a predominant ownership stake, accounting for 75% of the shareholding. The governance of the Board is presided over by Mr. M. Hussain Hasham, while the executive leadership is steered by Mr. Ahmed Ebrahim in the capacity of Chief Executive Officer