Lahore, March 08, 2019 (PPI-OT): The ratings reflect the Company’s diverse revenue streams (Sugar, Ethanol, Bagasse) and sponsors strong acumen in the sector. The Company remains exposed to volatility in Sugar sector. Low recovery rate and depressed sugar prices resulted in subpar performance in the sugar segment in FY18, having a significant impact on the Company’s bottomline. However, sugar prices have recovered to an extent in the local market lately.
Financial risk is high owing to highly leveraged capital structure. The Company utilizes short-term borrowings to finance its inventory and has also undertaken significant BMR activities during the year. This, coupled with high finance cost, has put the Company’s coverages under distress. Meanwhile, Sponsors commitment to provide financial support in a timely manner cushions the risk profile of the Company.
The ratings are dependent upon the Company’s ability to strengthen its margins, improve profitability and debt service coverages. Any further deterioration in margins and/or cash flows will impact the ratings. Improvement in governance framework and internal controls will be favourable for the ratings.
For more information, contact:
The Pakistan Credit Rating Agency Limited (PACRA)
Awami Complex, FB1, Usman Block New Garden Town,
Lahore – Pakistan
Tel: +9242 586 9504 -6
Fax: +9242 583 0425