PACRA Maintains Entity Ratings of Noon Sugar Mills Limited

Lahore, November 07, 2019 (PPI-OT): The ratings reflect Noon Sugar Mills Limited’s diverse revenue stream, which comprises the sale of sugar and ensuing by-products, electricity and ethanol. The margins in the sugar industry have been depressed lately. However, a reduced sugarcane crop during MY19, resulting in inflated sugar prices, benefited industry players. The Company has displayed stability in margins through the support of distillery operations. It recently underwent capacity enhancement, expanding its distillery production capacity by 50,000 MT, with operations formally commencing in January, 2019.

Though, constrained raw material supply led to low capacity utilization, margins improved. Going forward, the Company aims to focus on improving efficiency through BMR. Meanwhile, the Company’s financial profile remains adequate, characterized by long working capital cycle, moderate coverages and a leveraged capital structure. The Company has a mismatch at trade asset level that strains coverages.

The ratings are dependent on the management’s ability to reduce leveraging and improve working capital management, while maintaining profitability. Increased utilization and generating envisaged cashflows for distillery expansion remains critical for ratings. Any deterioration in margins and /or coverage ratios will have a negative impact on ratings.

For more information, contact:
Analyst
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
Email: hammad.rashid@pacra.com
Web: www.pacra.com

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