SGM Sugar Mills Limited, referred to as "SGM" or "the Company," operates as a publicly unlisted entity.

The Company was incorporated in September 2007 and was originally jointly owned by the Dhabi Group (44%), Etihad Group (22%), and the Mehar Family (34%). In May 2018, the United Group, represented by the Essarani Family, acquired a controlling stake, expanding its influence in the industry. Despite this transition, the Mehar Family retains its shareholding and continues to play an active role in the company’s strategic direction, ensuring continuity in its leadership and decision-making.

The primary business of the Company involves the sale and manufacturing of crystalline sugar along with ensuing byproducts (Molasses and Bagasse). The Company has a crushing capacity of 12,000 TCD with its mill located in Ghotki, Sindh, whereas the head office is located in Karachi. In terms of production performance, SGM recorded sugar production of 120,886 MT during the fiscal year MY24. This marks an increase of ~37% compared to the 87,685 MT produced in MY23, demonstrating a steady improvement in operational efficiency and output. The mill’s capacity utilization remained at ~91% during MY24. The Company operated for 108 crushing days during the year, which is indicative of an efficient operational period. Additionally, the sugar recovery rate, which measures the amount of sugar extracted from the sugar cane, increased by ~0.45%, from ~10.2% in MY23 to ~10.24% in MY24. This improvement in recovery rate can largely be attributed to favorable moisture content in the sugar cane crop, which enhances the efficiency of the extraction process and leads to a higher yield of sugar from the raw material.

The majority shareholding of the company is held by the Essarani Family (77%), distributed among Mr. Deoo Mal Essarani (16%) and his three sons—Mr. Asha Ram (29%), Mr. Mahesh Kumar (13%), and Dr. Tara Chand (20%). The remaining 23% of the shares are retained by the Mehar Family, with Mr. Sardar Muhammad Baksh Khan Mehar holding 10% and Mr. Sardar Ali Gohar Khan Mehar owning 13%.

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 investor ssuggest 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 'Deoomal United Group.' The group's diversified portfolio spans multiple industries, with key assets including sugar mill—Sindh Abadgar's 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. Duringthis 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.

Board of Directors comprises four members including the Chairman, Chief Executive Officer and two Non-Executive Director. All four members belong to Essarani Family, with no representation of Mehar Family.

Mr. Deo Mal Essarani acts as the Chairman of the Board. He has over 47 years of diversified experience and also acts as the Chairman for two other group companies - Sindh Abadgar's Sugar Mills and United Ethanol Industries Limited. Dr, Tara Chand acts as a Non-Executive Director. Mr. Chand has more than 16 years of experience in the sugar industry.

SGM currently 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 reflecting a room for improvement on effectiveness of the Board.

M/s Rahman Sarfaraz Rahim Iqbal Rafiq Chartered Accountants, classified in Category ‘A’ by the SBP with a satisfactory QCR rating by ICAP, have been appointed as the external auditors of the Company. They have expressed an unqualified opinion on the financial statements for the year Sep-24.

The organizational structure is divided in two segments: Mill operations overseen by the resident director and Head-Office administration managed by the Group CFO. Both heads report directly to the CEO. Specialized departments include Administration & Sales, Finance & Tax, Purchase, and Corporate Affairs, all reporting to the CFO, who reports directly to the CEO.

Mr. Asha Ram has been appointed as CEO. He is supported by a skilled leadership team, including Mr. Hyder Bux Rustamani (Resident Director Mills), and Mr. Saqib Ghaffar (Group Director Finance). Together, they provide strong leadership and direction for the Company. However, key responsibility for managerial oversight and decision making rests with Dr. Tara Chand Essarani, who brings over 16 years of expertise in the sugar and allied industries. In addition to his role he is also the CEO of Sindh Abadgar’s Sugar Mills Limited and United Ethanol Industries Limited.

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 itsoperations and enhance efficiency. This software helps integrate various business processes, providing acentralized system for managing key functions such as inventory, production, finance, and human resources.

Oversight and effective management is maintained through the internal audit department which is shared on a group level. The department is headed by Mr. Moin, who acts as the Group Internal Auditor. The group has expanded the internal audit department by inducting more individuals recently.

Pakistan’s sugar industry stands as the second-largest agro-based sector in the country, comprising approximately90 mills with an annual crushing capacity of 80-90 million MT. Despite its scale, the industry faces persistentchallenges, particularly due to the Government-regulated sugarcane support prices, which are set based onfarmer’s costs and often constrain millers' profitability. In MY23, sugar production declined by approximately 15%,reaching 6.7million MT, primarily due to the devastating floods that damaged standing crops and reduced therecovery rate. To manage the surplus inventory, the Government permitted the export of 0.5 million MT of sugar,offering some relief to the industry. The current MY24 season also reflects the lingering effects of flash floods, with a 4.7% loss in cultivated area. Despite these setbacks, sugar production is estimated to recover slightly toaround 7 million MT. The Government’s continued support for exports is expected to provide a much-needed boostto millers, helping them navigate challenging industry dynamics and mitigate financial pressures.

The Company contributed approximately ~1.7% to the total production of sugar produced in Pakistan.

The primary source of the Company's revenue is derived from the sale of refined sugar. A geographical split of revenue indicates that ~98% is generated from the local market, while the remaining ~2% originates from exports. During MY24, the Company's topline increased by ~52%, reporting to PKR 14 billion compared to PKR 9 billion in the corresponding period of the previous year MY23. This growth was driven by an increase in the sale price per kg, which rose from PKR 91/kg in MY23 to PKR 112/kg in MY24. Looking ahead, revenue stability is anticipated, underpinned by resilient local market demand for sugar. Additionally, the Company's financial performance improved due to sugar exports, amounting to PKR 205mln, which contributed positively to its results.

The Company's profitability margins reflect a deteriorated performance during MY24. The gross profit margin fell sharply to ~12.6% (MY23: ~18.3%). This steep decline was primarily driven by a substantial increase in the procurement cost of sugarcane, which had a direct negative impact on the cost of production. Higher sugarcane costs reduced the overall margin from the core business operations, making it more difficult to sustain profitability at the same levels as in the previous year. This translated into a shrinking Operating profit margin (~11.2%, down from ~16.6%). Moreover, during MY24, the net profit margin contracted to 1% from ~3.5%. This decline is primarily attributed to a decline in the net income during the year. Additionally, the decline is primarily attributed to a substantial increase in finance costs, which rose to ~19%, reflecting the impact of elevated borrowing costs in a high-interest-rate environment

Going forward, the management aims to improve business performance through efficient operations with no major expansion activity planned.

The Company’s working capital management has shown signs of increased operational efficiencies during MY24. Inventories witnessed an improvement, averaging 44 days compared to 91 days in MY23, driven by low levels of finished goods. Trade receivables remain negligible at 0 days on average, underscoring the Company’s efficient receivables collection practices. However, trade payables averaged 6 days, from 7 days in MY23, indicating improved utilization of supplier credit. Despite this, the Gross Working Capital cycle shortened to 44 days (MY23: 91 days), resulting in a Net Working Capital cycle of 38 days compared to 85 days in the previous period. Leverage indicators present a stable picture, with Short-Term Total Leverage remaining neutral at -23% (MY23: -14%) and Short-Term Trade Leverage recorded to -57% from -17%, reflecting dependency on short-term trade credit. Going Forward, the working capital cycle is expected to improve due to the efficient selling of stock through export.

The Company's coverage indicators reflect a mixed performance during MY24, highlighting challenges in its financial risk profile. The EBITDA-to-Finance Cost ratio has declined to 1.6x (MY23: 1.9x), signaling a reduced capacity to cover finance costs through operational earnings. Similarly, the FCFO-to-Finance Cost ratio has weakened to 1.3x from 1.8x, indicating tighter cash flow coverage of financial obligations. Debt repayment timelines have lengthened (6.9x from 3.5x) due to weaker cash flow generation, highlighting the need for improved financial efficiency. Going forward, coverages are expected to ease resulting due to lower finance cost.

SGM maintains a low-leveraged capital structure, which is a good sign in comparison to other industry players, with a debt-to-equity ratio standing at ~36.7% in MY24 (MY23: ~60.7%). The Company's debt consists of short-term borrowings, constituting ~40%, and long-term borrowing, constituting ~60% of the total debt. In MY24, the total debt of the Company stood to PKR 2,193mln due to increased utilization for running finance for working capital purposes and repayment of loan. The equity base of the Company stood at ~PKR 5,261mln (MY23: ~PKR 2,687mln).