Hunza Sugar Mills (Pvt.) Limited

RATING REPORT | Mar-26

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Rating History
Dissemination Date Long-Term Rating Short-Term Rating Outlook Action Rating Watch
13-Mar-26 BBB+ A2 Stable Maintain -
14-Mar-25 BBB+ A2 Stable Maintain -
15-Mar-24 BBB+ A2 Stable Maintain -
16-Mar-23 BBB+ A2 Stable Maintain -
16-Mar-22 BBB+ A2 Stable Upgrade -
About the Entity

Hunza Sugar Mills (Pvt.) Limited, is a private limited company, incorporated in 2002. Hunza Sugar manufactures refined sugar, molasses, ethanol and other allied products. Hunza Sugar has a crushing unit in District Faisalabad with a crushing capacity of 15,000 TCD. Distillery has a production capacity of 125,000 liters per day. The shareholding is vested with the families of three brothers Mr. Idrees Chaudhury (31%), Mr. Saeed Chaudhry (32%), and Mr. Waheed Chaudhry (37%). Mr. Saeed Chaudhry is the CEO of Hunza Sugar.

Rating Rationale

The ratings reflect Hunza Sugar Mills (Pvt.) Limited ("HSML" or "the Company") established market position in Pakistan’s sugar and ethanol sectors, further bolstered by the strategic support of the Hunza Group. The Company benefits from a diverse revenue stream and the experienced leadership of its management team. The Company remains exposed to the inherent volatility of the sugar industry, where fluctuations in sugarcane yields and sucrose recovery rates are heavily influenced by agronomic conditions and cyclical crop production. Furthermore, global ethanol prices have remained demoted, continuing to pressure the profitability matrix of the export-oriented ethanol segment. On the financial front, HSML recorded a 3.5% decline in revenue, primarily attributable to reduced sugar sales volumes following the strategic reorganization involving the transfer of Hunza Sugar Unit-2 to Hunza Steel (Pvt.) Limited under a merger scheme. Despite the decline in revenue, the subsequent incorporation of Hunza Steel as a wholly-owned subsidiary within the group is expected to strengthen overall financial resilience and generate operational synergies. Notwithstanding the decline in the topline, operational efficiencies and lower costs led to a significant improvement in margins; Gross Margin rose to 16.2% (MY24: 10.7%) and Operating Margin reached 9.2% (MY24: 3.8%). However, net margins remained modest at 2.7%, primarily constrained by elevated finance costs. A key rating constraint remains the Company's high leverage and capitalization profile. While total debt has reduced to PKR 10.6 billion, the capital structure is characterized by a 54% leverage ratio, consisting almost entirely of short-term borrowings. This heavy reliance on short-term debt to fund working capital requirements exposes HSML to substantial liquidity pressures, and heightened vulnerability to interest rate volatility. Furthermore, the firm commitment and continued support from the sponsors provide a significant cushion to the ratings.

Key Rating Drivers

The ratings encapsulate the Company's adeptness in managing operational efficiencies and improving core margins. Moving forward, the ratings remain sensitive to the stabilization of net profitability and the effective rationalization of its debt structure to manage the asset-liability alignment.

REPORT CONTENTS
  1. Rating Analysis
  2. Financial Summary
  3. Rating Scale
  4. Regulatory Disclosure

Hunza Sugar Mills (Pvt.) Limited


Rating Analysis

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Profile
Legal Structure

Hunza Sugar Mills (Pvt.) Limited (Hunza Sugar or the Company) is a private limited Company. It was incorporated in 2002.


Background

Hunza Sugar is part of the Hunza group. The flagship company of the group was Hunza Ghee Mills (Pvt) Limited in the edible oil sector and it dates back to 1988. The company has a diverse revenue stream. It manufactures refined sugar, molasses, ethanol, and other allied products. The company installed its distillery and CO2 processing plant in MY14 and MY18, respectively.


Operations

The Company is involved in manufacturing and selling of multiple sugarcane related products and operates in District Faisalabad. It’s engaged in the businesses of a) Sugar, b) Ethanol and c) Other allied products. HSML has successfully completed the merger of Unit 2 with Hunza Steel, establishing Hunza Steel as a wholly owned subsidiary of Hunza Sugar Mills. This strategic consolidation is designed to fortify financial resilience and drive superior operational efficiencies across the group.


Ownership
Ownership Structure

The Company is a family-owned entity. Shares of the Company are divided among the families of three brother Mr. Idrees Chaudhry, Mr. Saeed Chaudhry, and Mr. Waheed Chaudhry.  Mr. Idrees Chaudhary family owns 31% shares, Mr. Saeed Chaudhary family owns 32% shares, and Mr. Waheed Chaudhary owns 37% shares.


Stability

Ownership of the Company seems stable as majority shareholding vests with the sponsoring family.


Business Acumen

Hunza Group initially started with Hunza Ghee Industries (Pvt.) Limited in the Edible Oil sector in 1988. The Company produces vegetable ghee and cooking oil that sells under the brand ‘Swera Ghee’ and ‘Swera Cooking Oil'.


Financial Strength

Hunza Sugar Mills (HSML) derives significant financial stability from the diversified Hunza Group, which spans food processing, agro-processing, trading, and oil & ghee sector. This diversification mitigates risk, enhancing financial resilience by reducing dependence on single-industry performance. The group's integrated operations and strong market presence provide HSML with improved capital access and operational efficiencies. Strategic resource allocation within the group further supports HSML's growth and expansion.


Governance
Board Structure

BoD, including the CEO, comprises three members. All three are family members and hold shares of Hunza group (except Swera (Pvt) Ltd.). There are no independent members on the board. The BoD has no committees in place.


Members’ Profile

Mr. Idrees Chaudhary, the eldest brother, is the Chairman of Board of Directors. He serves as an adviser to the management. Mr. Waheed Chaudhary looks after the external relations of the Company. All the Board members have more than 35 years of overall experience and more than 23 years of experience in sugar industry.


Board Effectiveness

BoD meetings are conducted to discuss important matters related to business approve minutes. However, minutes of the meetings are restricted to formal approvals required for regulatory purposes. Discussions regarding business aspects are not documented in the minutes.


Financial Transparency

The auditors of the Company are Amin, Mudassar & Co, they have issued an unqualified opinion on the company’s financial statements for MY 2025. The auditors have satisfactory QCR rating and also listed in SBP panel in category B.


Management
Organizational Structure

The Company is headed by a CEO who is supported by Senior General Manager and Manager Finance & Accounts at the Head office. On each Site, the company has GM projects with a team of production and technical staff including a head responsible for cane purchase and accounts personnel dealing with operational matters. Overall, each site has member of the family/shareholder present at site for monitoring of operations day to day operations. The company receives IT support at group level.


Management Team

Mr. Saeed, CEO of the company is the youngest brother and is CEO of Group companies (except Swera (Pvt) Ltd.). He has 23 years of experience in the Sugar Industry and over 35 years of experience in the Edible Oil Sector.


Effectiveness

Monthly management accounts, Accounts receivable and payable balance and financial matters are presented to the CEO for review and discussions.


MIS

Hunza Sugar, having previously relied on an in-house ERP system, successfully transitioned to Microsoft Dynamics 365 ERP. This strategic move involved integrating processes across the supply chain, finance, accounts, tax, production, sales, and distribution. Additionally, they conducted comprehensive user training and implemented HR development initiatives. As a result, this transformation significantly impacted their operational efficiency and enhanced the reliability of their processes.


Control Environment

Monthly management accounts, Accounts receivable and payable balance and financial matters are presented to the CEO for review and discussions. Additionally, the organization's internal audit function is executed with complete independence by a QCR- rated firm, A.H.W & Co, which assigns dedicated teams to oversee both the head office and the site locations, thereby promoting a culture of transparency, accountability and strict adherence to established protocols.


Business Risk
Industry Dynamics

During 2024–25, Pakistan’s sugar industry operated without a provincial support price for sugarcane in line with conditionalities linked to the International Monetary Fund, compared to PKR 425 per maund in 2023–24, shifting market dynamics toward supply–demand fundamentals, reducing total production by 14.33% to 5.86 million tonnes, with Sindh’s output falling 19.80% to 1.62 million tonnes due to heatwaves, erratic weather, pest attacks, and lower recovery rates. Sugar production increased to 6.66 million tonnes in MY25 from 5.8 million tonnes in MY24, supported by improved sugarcane availability and timely crushing. Carryover stocks of 0.766 million tonnes as of 1 December 2024 ensured adequate domestic supply, yet prices rose in the second half of the season, prompting the federal government to approve 500,000 tonnes of imports through the Trading Corporation of Pakistan, of which 306,737 tonnes were imported to stabilize the market. A nearly 50% reduction in the policy rate also eased financing costs for mills. Looking ahead, the International Sugar Organization projects global production of 180–189 million tonnes in 2025–26 with relatively subdued prices amid moderate demand growth, while domestically the industry is expected to record moderate growth supported by improved sugarcane availability, better recovery, timely crushing, adequate supplies, and softer international prices, enabling more efficient operations despite the absence of a government support price.


Relative Position

Hunza Sugar contributed approximately 2% making it one of the leading sugar mills in Punjab region.


Revenues

The Company primarily derives its revenue from the production and sale of sugar and ethanol, while ancillary income streams include sales of mud, bagasse, and CO2. During MY25, the Company’s topline stood at PKR 22.7bln (MY24: PKR 23.5bln). The Sugar segment recorded a decline in revenue to PKR 13bln in MY25 (MY24: PKR 15bln), mainly due to the pricing effect and the merger of one of its production units with Hunza Steels (Pvt.) Limited. The Ethanol segment also witnessed a decline, reporting PKR 7.6bln in MY25 (MY24: PKR 8.9bln).


Margins

The Company’s MY24 results reflect a mixed credit profile. While revenues declined by 3.5%, Gross margin (MY25: 16.2% ; MY24: 10.7%)  and Operating margins (MY25: 9.2% ; MY24: 3.8%) improved significantly, supported by lower costs and operational efficiencies. Net margin remained thin at 2.7%, constrained by high finance costs, though reduced leverage improved debt servicing capacity. Overall, margin expansion and deleveraging provide near-term credit relief; however, weak cash flows, and liquidity pressures continue to pose medium-term credit risks.


Sustainability

Being an export sector with minimal imports tends to bode well for the Company as the economic situation has favored exports and constrained imports into Pakistan. However, the Company is exposed to volatility and ensuing challenges in the sugar sector. HSML has proceeded with the merger of Hunza Sugar Mills Unit II into Hunza Steel Mills, thereby establishing Hunza Sugar Mills as the holding entity. This consolidation is projected to enhance financial resilience and improve operational efficiencies.


Financial Risk
Working capital

Hunza Sugar’s working capital cycle deteriorated notably in MY25, reflecting heightened stress on liquidity and operational efficiency. Average inventory days increased to 44 (MY24: 50), signaling slower turnover and higher holding costs, while trade receivable days expanded to 33 (MY24: 17), indicating delayed collections and elevated credit risk. Consequently, gross working capital days stretched to 77 (MY24: 67), with net working capital days rising to 54(MY24: 47). Although trade payable days increased to 22 (MY24: 20), temporarily easing cash outflows, the overall lengthening of the cash conversion cycle underscores rising pressure on short-term liquidity and financial flexibility.


Coverages

A critical analysis of the Company’s debt coverage ratios reflects a marked improvement in its capacity to service debt obligations, positively influencing its perceived financial stability and creditworthiness. The decline in finance costs from PKR 4.3 billion in MY24 to PKR 1.8 billion in MY25 has led to a significant enhancement in FCFO coverage, rising from 0.6x to 1.4x. This improvement indicates a strengthened ability to cover finance costs through operating cash flows, compared to the previous year when internal cash generation was insufficient to fully meet financing expenses. Furthermore, total coverage, which evaluates the Company’s capacity to meet all fixed financial charges, also remained stable at 0.2x (MY24: 0.3x). Although the ratio remains below ideal thresholds, the upward trend reflects easing financial pressure. These improved coverage metrics underscore a moderation in financial risk relative to MY24 and suggest enhanced cash flow protection. Nevertheless, sustained focus on strengthening operating performance and maintaining disciplined leverage management remains essential to further solidify the Company’s financial profile.


Capitalization

The Company’s capitalization ratio reflects moderate leverage of 54%, underpinned by a reduction in total debt to PKR 10.6bln, entirely comprising short-term borrowings. This concentration heightens rollover and liquidity risks, while elevated leverage amplifies interest rate exposure and solvency pressures. The resulting strain on financial flexibility underscores the need for prudent capital management to mitigate the heightened risk profile.
 
 

Mar-26

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Hunza Sugar Mills (Pvt.) Limited


Financial Summary

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(PKR mln)


 Sep-25
12M		 Sep-24
12M		 Sep-23
12M
Audited Audited Audited
A. BALANCE SHEET
1. Non-Current Assets 4,665 4,701 9,992
2. Investments 62 62 64
3. Related Party Exposure 11,258 8,740 5,485
4. Current Assets 7,010 7,010 7,960
a. Inventories 1,505 3,938 2,501
b. Trade Receivables 2,741 1,383 832
5. Total Assets 22,995 20,514 23,501
6. Current Liabilities 3,054 2,327 2,983
a. Trade Payables 1,292 1,482 1,135
7. Borrowings 10,670 9,455 12,074
8. Related Party Exposure 98 236 831
9. Non-Current Liabilities 42 43 159
10. Net Assets 9,131 8,452 7,455
11. Shareholders' Equity 9,131 8,452 7,455
B. INCOME STATEMENT
1. Sales 22,748 23,581 34,142
a. Cost of Good Sold (19,057) (21,066) (27,953)
2. Gross Profit 3,690 2,515 6,189
a. Operating Expenses (1,587) (1,611) (1,473)
3. Operating Profit 2,104 904 4,716
a. Non Operating Income or (Expense) 308 1,252 (301)
4. Profit or (Loss) before Interest and Tax 2,412 2,156 4,415
a. Total Finance Cost (1,844) (4,300) (2,799)
b. Taxation 37 (517) (408)
6. Net Income Or (Loss) 605 (2,661) 1,208
C. CASH FLOW STATEMENT
a. Free Cash Flows from Operations (FCFO) 2,103 2,189 4,754
b. Net Cash from Operating Activities before Working Capital Changes 197 (2,005) 2,234
c. Changes in Working Capital (1,030) (1,991) 786
1. Net Cash provided by Operating Activities (833) (3,996) 3,020
2. Net Cash (Used in) or Available From Investing Activities (401) (1,067) (2,985)
3. Net Cash (Used in) or Available From Financing Activities (138) 4,989 (413)
4. Net Cash generated or (Used) during the period (1,372) (74) (378)
D. RATIO ANALYSIS
1. Performance
a. Sales Growth (for the period) -3.5% -30.9% 57.7%
b. Gross Profit Margin 16.2% 10.7% 18.1%
c. Net Profit Margin 2.7% -11.3% 3.5%
d. Cash Conversion Efficiency (FCFO adjusted for Working Capital/Sales) 4.7% 0.8% 16.2%
e. Return on Equity [ Net Profit Margin * Asset Turnover * (Total Assets/Shareholders' Equity )] 6.9% -33.5% 17.6%
2. Working Capital Management
a. Gross Working Capital (Average Days) 77 67 57
b. Net Working Capital (Average Days) 54 47 49
c. Current Ratio (Current Assets / Current Liabilities) 2.3 3.0 2.7
3. Coverages
a. EBITDA / Finance Cost 1.4 0.6 1.8
b. FCFO / Finance Cost+CMLTB+Excess STB 0.2 0.3 0.5
c. Debt Payback (Total Borrowings+Excess STB) / (FCFO-Finance Cost) 22.6 -2.7 3.9
4. Capital Structure
a. Total Borrowings / (Total Borrowings+Shareholders' Equity) 54.1% 53.4% 63.4%
b. Interest or Markup Payable (Days) 72.8 41.6 73.8
c. Entity Average Borrowing Rate 15.2% 24.0% 17.5%

Mar-26

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Hunza Sugar Mills (Pvt.) Limited


Rating Scale

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Mar-26

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Hunza Sugar Mills (Pvt.) Limited


regulatory disclosure

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  1. Rating Team Statements
    1. Rating is just an opinion about the creditworthiness of the entity and does not constitute a recommendation to buy, hold, or sell any security of the entity rated or to buy, hold, or sell the security rated, as the case may be. (Chapter III; 14-3-(x))
    2. Conflict of Interest
      1. The Rating Team or any of their family members have no interest in this rating (Chapter III; 12-2-(j))
      2. PACRA, the analysts involved in the rating process, and members of its rating committee and their family members do not have any conflict of interest relating to the rating done by them (Chapter III; 12-2-(e) & (k))
      3. The analyst is not a substantial shareholder of the customer being rated by PACRA [Annexure F; d-(ii)]
      4. Explanation: for the purpose of the above clause, the term "family members" shall include only those family members who are dependent on the analyst and members of the rating committee.
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