The Pakistan Credit Rating Agency Limited
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Ayesha Qasim

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PACRA Assigns Initial Entity Ratings to Noon Sugar Mills Limited

Rating Type Entity
(12-Nov-18 )
Action Initial
Long Term BBB
Short Term A2
Outlook Stable
Rating Watch -

The ratings reflect Noon Sugar Mills Limited’s (Noon Sugar) diverse revenue stream, which in addition to the sale of sugar and ensuing by-products, is augmented by ethanol sales. The margins in the sugar industry have been depressed lately. However, the Company is able to maintain adequate margins owing to improved sucrose recovery and better ethanol margins. The Company turned around its operations under new management in the last two years and is undertaking several steps to improve its efficiency through BMR and expansion in ethanol capacity. Meanwhile, Noon Sugar’s financial profile is stretched, characterized by a highly leveraged capital structure and modest coverages.

The ratings are dependent on the management’s ability to reduce leveraging and improve working capital management, while maintaining profitability. Timely commencement of ethanol expansion leading to better margins and cashflows is critical. Any deterioration in margins and/or coverages will negatively impact ratings.

About the Entity
Noon Sugar Mills was incorporated in 1964 as a public limited company, with its shares listed on the Pakistan Stock Exchange (PSX). The primary business of the Company is manufacturing and sale of white refined sugar and Ethanol. Noon Sugar has its registered office located on Sarwar Road, Cantt, whereas, the mill is located in Sargodha. The Company has the capacity to crush 9,000 tons of sugarcane and can produce 80,000 liters of ethanol per day.

Majority shareholding lies with the Noon Family through Mr. Mailk Adnan Hayat Noon (38%), his brother Mr. Salman Hayat Noon (20%), and associates (13%). Remaining shareholding is held by the general public. The Company is headed by Lt. Col. (R) Abdul Khaliq Khan, who is the Chief Executive Officer. He is ably supported by a professional management team. The seven member board of directors has two independent directors and is chaired by Mr. K. Iqbal Talib.

The primary function of PACRA is to evaluate the capacity and willingness of an entity to honor its obligations. Our ratings reflect an independent, professional and impartial assessment of the risks associated with a particular instrument or an entity. PACRA's comprehensive offerings include instrument and entity credit ratings, insurer financial strength ratings, fund ratings, asset manager ratings and real estate gradings. PACRA opinion is not a recommendation to purchase, sell or hold a security, in as much as it does not comment on the security's market price or suitability for a particular investor.