ISLAMABAD: The Pakistan Credit Rating Agency Limited (PACRA) has assigned “Initial Entity Ratings” to Tandlianwala Sugar Mills Limited.
According to an announcement of the PACRA on Friday, the assigned ratings incorporate TSML’s market position as one of the leading players in the country’s sugar industry.
The business risk profile of the company is bolstered by a diversified revenue stream from sugar, ethanol, and CO2 gas sales, having a capacity for sugar production and distillery of 48,500 TCD and 265,000 litres per day, respectively.
The total revenue of the company stood at Rs43 billion, major constituent of which was sugar’s local sales of Rs32 billion and export sales of Rs1.6 billion.
The revenue from the export of ethanol was Rs13.7 billion. The given rating is further supported by the extensive experience of its sponsors in the sugar and agriculture sectors. The operations of the company are strengthened by a management team distinguished for their exceptional experience and skill in navigating the complexities of the sugar industry.
The TSML maintains enduring relationships with growers, underpinned by a dedicated focus on sugarcane research and development initiatives. This provides a competitive advantage to the company mitigating volatility and industry-specific risks. Better availability of sugarcane led to stable sugar production. Rising sugar prices, in local market, and slight decrease in ethanol prices, in international market, sustained decent margin and benefitted the company's bottom-line. CO2 plant provides an additional cushion to cashflows.
Going forward, high sugar stock is expected to benefit the company in terms of export potential and higher prices may drive better margins for the Company.
Ratings draw strength from the Company’s adequate financial profile represented by a moderately leveraged capital structure and efficient management of working capital.
The ratings remain dependent on upholding the company's market position along with sustenance of business volumes, margins and achieving optimal utilization of production capacities while maintaining necessary cushion and discipline in working capital management.
The company’s performance as compared to other players in the current stretched economic scenario- challenges on demand front - remains vital for ratings.
Copyright Business Recorder, 2023
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