Al-Noor Sugar Mills Limited

Al-Noor Sugar Mills Limited (PSX: ALNRS) was set up in 1969 as a public limited company. It owns and operates sugar, medium density fiber (MDF) board and generation of power units.

Shareholding pattern

As at September 30, 2021, the directors, CEO, their spouses and minor children held over 17 percent shares, within which the major shareholders are Mr. Noor Mohammad Zakaria, and Mrs. Shehnaz Sattar Zakaria. The general public owns 55 percent shares followed by 13 percent in associated companies, undertakings and related parties, within which 9 percent shares are with Noori Trading Corporation (Private) Limited. Another 9 percent shares are held in mutual funds, while the remaining about 5 percent shares are with the rest of the shareholder categories.

Historical operational performance

Over the years, the company has seen a fluctuating topline, while profit margins have been relatively stable after MY19.

After contracting by nearly 15 percent in MY17, revenue in MY18 registered a growth of nearly 32 percent, with topline crossing Rs 9 billion. During the year, the company’s exports significantly from Rs 1.4 billion in MY17, to Rs 4.8 billion in MY18, whereas local sales reduced by almost 22 percent. But the rise in revenue was accompanied by a more than corresponding rise in revenue, causing the company to post a gross loss for the first time. On the other hand, other income increased substantially from Rs 19 million to Rs 1.35 billion in MY18. This was largely sourced from subsidy on export from federal government. Although the company still incurred a net loss, it was contained to a large extent due to the significant support from other income.

Revenue growth was subdued in MY19 as it posted a growth rate of close to 3 percent. Export sales dropped to Rs 1.2 billion from previous year’s Rs 4.8 billion, while local sales picked up nearly doubling year on year to Rs 8 billion. During the year, while the company achieved a higher recovery rate of 10.6 percent, the volume of sugar produced at 94,825 metric tons was lower by over 14 percent. Moreover, cost of production reduced to over 87 percent of revenue allowing some room for profitability unlike MY18. This also trickled down to the bottomline that was also supported by profit from associate of Rs 188 million. Thus, net margin for the year stood at 2 percent.

In MY20, topline climbed up by nearly 17 percent with revenue nearing Rs 11 billion. Export sales grew to Rs 2 billion almost doubling year on year, while local sales registered an 8.7 percent incline. With cost of production declining to 84.5 percent, gross margin increased to 15.5 percent. But the fall in other income, the latter was largely supporting profitability for the last two years, led to a marginal decline in operating margin that also trickled down to the net margin. Although the bottomline was recorded at a higher Rs 202 million, net margin was lower at 1.85 percent.

Revenue contracted once again in MY21 as it reduced by a marginal 1 percent. Export sales fell again, to Rs 722 million compared to over Rs 2 billion seen in the previous year. On the other hand, local sales registered a 13.4 percent to reach Rs 10 billion. The recovery rate also increased to 10.12 percent, compared to 9.71 percent seen in the last year. This was due to good quality of sugarcane. With cost of production marginally down to 84.2 percent, gross margin increased slightly to 15.8 percent. Moreover, as finance expense also consumed a smaller share in revenue due to lower expense of long term financing and short term borrowings, most likely a result of lower interest rates, net margin was also marginally higher at almost 2 percent for the year.

Quarterly results and future outlook

Topline in the first quarter of MY22 was higher by over 17 percent year on year at Rs 2.8 billion. On the other hand, production cost was a little higher at 86.6 percent compared to over 84 percent in the same period last year. Therefore, gross margin was lower at 13.4 percent. With most factors remaining similar as a share in revenue, net margin was also lower year on year at 1.5 percent. On the other hand, recovery was recorded at 9.54 percent that was higher than 9.39 percent seen in 1QMY21. The company expects recovery percentage to increase as the province has had a good rainfall.

The company operates in the province of Sindh. While the price of sugar cane is notified by the Government of Sindh, the final selling price is determined by the market forces. However, the company claims that growers are reluctant to sell at the notified price; therefore the mills are forced to purchase the higher price that increases the cost of production.