United Ethanol Industries Limited, referred to as "United Ethanol" or "the Company," operates as a publicly unlisted entity.

United Ethanol Industries Limited was established in 2003 and was initially owned by the Etihad Group, a prominent business conglomerate. Over the years, the company gained recognition in the ethanol production industry. However, on September 16th, a significant transition took place when ownership of the company was acquired by the Essarani Family. This acquisition marked a pivotal moment in the company’s history, as it subsequently became a vital part of the United Group, a diversified business entity with a strong presence in various sectors. The Essarani Family’s leadership and strategic vision have since played a crucial role in shaping the future direction and growth of the company within the United Group.

The company's manufacturing facility is strategically located in Sadiqabad, Rahimyar Khan, providing easy access to 11 sugar mills within a 100-kilometer radius, including its own subsidiary, SGM Sugar Mills. Specializing in the production of ENA Grade ethanol (~96% v/v ethanol) and B Grade ethanol (~94% v/v ethanol), the facility boasts an installed production capacity of 120,000 liters per day. In the fiscal year 2024 (MY24), the company produced 34,966,246 liters of ethanol, a decrease from the 39,170,829 liters produced in MY23, reflecting an 11% decline. This reduction is primarily attributed to challenges in molasses procurement and availability

The ownership structure of the company is held by the Essarani Family, with Mr. Deoo Mal Essarani holding a ~24% stake. His four sons are also significant shareholders: Mr. Asha Ram owns ~29%, Dr. Tara Chand holds ~24%, Mahesh Kumar possesses ~22%, and Mr. Jugdesh Kumar has a ~1% stake in the Company. This distribution reflects a family-controlled ownership model, ensuring that decision-making remains centralized within the family, which can contribute to a unified long-term strategic vision for the company.

Given the current ownership distribution and the strong family involvement, it is unlikely that significant changes will occur in the near future. The family's control of the majority of shares and the absence of outside investors suggest that the enterprise is positioned for continuity. This stability provides a solid foundation for maintaining long-term operations and can also foster trust with stakeholders, including employees, customers, and business partners, who value consistency in leadership and direction.

The Essarani family brings a wealth of experience in the agricultural sector, operating under the umbrella of the 'United Group.' The group's diversified portfolio spans multiple industries, with key assets including two sugar mills—Sindh Abadgar's Sugar Mills and SGM Sugar Mills. Additionally, the family’s holdings extend to United Ethanol Industries Limited, a major player in ethanol production, as well as Agro Trade Private Limited, United Agro Chemicals and, Synergy Packaging (Pvt.) Limited which further strengthen the group's presence in the agricultural and chemical industries.

The company maintains robust financial stability attributed to the support of its group and sponsors. As of the MY23, the group's total assets amounted to ~PKR 29bln, backed by an equity base of around PKR 13.2bln. During this period, the group achieved a net profit of ~PKR 1,682mln. The group maintains a moderate level of leverage. This stable financial position the Company for continued growth and resilience in the face of market fluctuations.

The Board of Directors is composed of four members, encompassing the Chairman, CEO, and two Non-Executive Directors. The board is predominantly influenced by the sponsoring family, lacking independent oversight, signifying an opportunity for enhancement. The sponsors have expressed their intention to augment the Board's composition by appointing an independent director in the future.

Mr. Deoo Mal Essarani serves as the Chairman of the Board and also holds the position of Chairman on the board of two other group companies, namely Sindh Abadgar’s Sugar Mills Limited and SGM Sugar Mills Limited. With over 47 years of experience, he assumed the chairmanship role. Meanwhile, his son, Mr. Mahesh Kumar, serves as a Non-Executive Director, bringing more than 21 years of experience to the board. Additionally, Mr. Mahesh Kumar holds a position on the board of Sindh Abadgar’s Sugar Mills Limited.

During the MY24, the Board of Directors convened for a total of four meetings, ensuring that detailed and formal minutes were recorded for each of these sessions. These meetings served as key opportunities for the Board to discuss and make decisions on various matters concerning the company’s operations, strategies, and governance. At this time, United Ethanol has not implemented any specific Board committees, which are often used by companies to delegate particular responsibilities or areas of oversight to smaller, specialized groups within the Board. Without these committees, all decision-making and oversight duties fall directly to the full Board.

The Company's external auditors are Reanda Haroon Zakaria & Co. Chartered Accountants The audit firm is rated in category 'B' of SBP's panel of auditors.

The Company's organizational structure is clearly defined, with distinct reporting lines that differentiate responsibilities between the production site and the head office. Operational functions are primarily overseen by the General Manager (GM) of the Mill, who is responsible for day-to-day production activities. On the other hand, support functions, with the exception of finance, are managed centrally at the group level. These functions are under the supervision of the Group Chief Financial Officer, who ensures consistent oversight and alignment with the company’s overall strategy.

The Company’s management team is composed of experienced professionals, although they have not been with the Company for an extended period. Dr. Tara Chand, the CEO, brings over 15 years of expertise in the sugar and allied industries. In addition to his role as CEO of the Company, Dr. Chand also serves as the CEO of Sindh Abadgar’s Sugar Mills. He is supported by a skilled leadership team, including Mr. Abdul Waheed, who serves as the General Manager (GM) of the Factory, and Mr. Saqib Ghaffar is the Group Director Finance. Together, they provide strong leadership and direction for the Company.

The Company currently does not have formally established management committees. However, the management team engages in regular performance discussions to assess and review ongoing activities. These discussions allow the leadership to evaluate the progress of various initiatives, address challenges, and ensure alignment with the Company’s strategic goals.

The Company has implemented Enterprise Resource Planning (ERP) software from Cosmosoft to streamline its operations and enhance efficiency. This software helps integrate various business processes, providing a centralized system for managing key functions such as inventory, production, finance, and human resources.

The internal audit function is currently centralized at the group level. Going forward, the group plans to enhance its control environment by expanding the internal audit team, adding more personnel to oversight and improve the effectiveness of internal controls across the organization.

Pakistan's ethanol industry is export-focused due to limited domestic consumption, with ~50%-70% of production being exported. In MY23, the country's ethanol exports reached 595 million liters (MY22: 800mln liters), marking an ~25%decrease. Global market prices have been elevated due to heightened ethanol demand, despite global economic uncertainties. The impact of high international prices was amplified by the devaluation of the Pakistani Rupee. Improved sugarcane production in MY24, alongside stable profits for domestic distilleries, is expected to keep industry margins steady in the current fiscal year. However, the industry faces increased raw material costs from the elevated price of molasses.

In MY24, the company represented 5% of Pakistan's overall ethanol exports.

The Company’s revenue stream is heavily reliant on exports, which account for ~97% of total revenue in MY24. This export-centric revenue model support the Company’s financial performance and exposes it to both opportunities and risks associated with global market dynamics. In MY24, the Company experienced a significant revenue increase, reaching PKR 7.4 billion, up from PKR 6 billion in MY23. This growth represents a ~22% year-on-year improvement, which can be attributed to the Company benefited from macroeconomic factors such as the depreciation of the Pakistani rupee, despite reduced ethanol prices and less quantity produced. The currency devaluation made the Company’s exports more competitive in the global market.

During MY24, the company faced challenges in managing the rising cost of raw materials, particularly molasses, which is a key input in its production process. Despite the escalation in procurement costs, the Company was unable to effectively pass on these increased expenses to the export market, which directly impacted its profitability. As a result, the company's margins contracted. The gross margin saw a notable decline, dropping to ~21.2% in MY24, compared to ~35.7% in MY23. This ~14.5% decrease reflects the significant pressure that raw material costs have exerted on the Company’s ability to maintain profitability at the production level. Similarly, the operating margin also experienced a deterioration, decreasing to ~14.7% in MY24 from ~28.8% in MY23. Indicates that the company faced higher operational costs, including both raw material procurement and possibly other operational expenses. As a result of these margin contractions, the company’s bottom line also saw a decline. The net income for MY24 stood at PKR 825 million, down by ~22% from PKR 1,065 million in MY23. This drop in profitability is reflected in the company’s net margin, which deteriorated to ~11.1% in MY24 from ~17.6% in the previous year.

The company currently has no significant expansion initiatives in the pipeline. Its primary emphasis lies in enhancing efficiency through BMR efforts.

The Company’s net working capital cycle showed significant improvement in MY24, reducing to 125 days from 149 days in MY23. This enhancement in the working capital cycle was primarily driven by a reduction in inventory days, which decreased to 99 days in MY24 from 116 days in the previous year. This suggests that the Company effectively sold its finished inventory, likely due to improved inventory management practices. Furthermore, the Company experienced a decrease in receivable days, which dropped to 29 days in MY24 from 36 days in MY23. This indicates that the Company was more efficient in collecting payments from its customers, thus improving cash flow and reducing the risk associated with outstanding receivables. Conversely, payable days remained relatively stable, with a slight decrease to 3 days in MY24 from 4 days in MY23. This indicates that the Company maintained its payment terms while optimizing its overall working capital cycle.

In MY24, the Company showed notable improvement in its financial health, as evidenced by the strengthening of key coverage ratios. The interest coverage ratio increased to 4.8x in MY24, up from 4.2x in MY23. This improvement was primarily driven by a reduction in finance costs during the period, which suggests that the Company benefited from lower borrowing rates and a reduction in its debt levels. Additionally, the Company generated free cash flows of PKR 1,313 million in MY24, compared to PKR 1,726 million in MY23. The Company's debt coverage ratio, which evaluates its ability to service both interest and principal repayments, also showed a positive trend, rising to 3.2x in MY24 from 2.5x in MY23. This increase indicates that the Company is in a stronger financial position and better able to meet its debt obligations moving forward.

The Company's Debt-to-Equity ratio remained relatively stable and low leveraged in MY24, standing at ~28%, compared to ~29% in MY23. This slight decrease in the ratio reflects a marginal reduction in the Company’s financial leverage, indicating that the Company has maintained a balanced capital structure over the past year. Total borrowings slightly increased to PKR 2,676 million in MY24, up from PKR 2,543 million in MY23. This increase in borrowings was primarily due to a higher reliance on working capital financing. The Company does not have any long-term borrowings, which means its debt profile is relatively more flexible. Equity, on the other hand, increased to PKR 6.8 billion in MY24, up from PKR 6 billion in MY23. This growth in equity reflects retained earnings, which has helped the Company boost its net worth.