The Pakistan Credit Rating Agency Limited
28-Dec-18
Analyst
Ayesha Qasim
ayesha.qasim@pacra.com
+92-42-35869504
www.pacra.com
Applicable Criteria
- Methodology | Corporate Ratings | Jun-18
- Methodology | Criteria | Rating Modifier | Jun-18
- Methodology | Correlation Between Long-Term And Short-Term Rating Scale | Jun-18
Related Research
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PACRA Assigns Initial Entity Ratings to Jauharabad Sugar Mills Limited
| Rating Type | Entity | |
|
Current (28-Dec-18 ) |
||
| Action | Initial | |
| Long Term | BBB | |
| Short Term | A2 | |
| Outlook | Stable | |
| Rating Watch | - | |
Ratings reflects adequate business profile of Jauharabad Sugar Mills Limited in line with the current dynamics of sugar industry. During FY18, volatility in the sugar industry and depressed prices led to a decline in the Company’s revenue and low margins. Over the years, sponsors’ business acumen and support (in the form of loan) have remained beneficial for the Company. The management's consistent attention to improve efficiency is expected to supplement growth maxims. Going forward, the management plans to diversify the Company’s revenue base by setting up a power plant and a distillery. Jauharabad Sugar Mills financial profile remains stretched and is characterized by moderately leveraged capital structure, largely emanating from working capital needs. The Company's cash flows are under pressure, depressing the coverage ratios.
Ratings are dependent upon the management’s ability to improve its revenue while improving the margins and, in turn profitability. Meanwhile, close monitoring of working capital requirements remains critical for the ratings. Any deterioration in the Company’s cashflows and coverages would have a negative impact on the ratings. Streaming the ownership structure remains imperative.
About
the Entity
Jauharabad Sugar Mills Limited is a public limited company, listed on Pakistan Stock Exchange since 1973. The Company was acquired from Saigol Group in Oct-13 by Cane Processing (Pvt.) Limited. The Company’s operational crushing unit, having sugarcane crushing capacity of 7000 tons per day, is located in Jauharabad, Khushab District. The Company’s registered office is situated in Cavalry Ground, Lahore Cantonment. The Company is engaged in manufacturing and sale of refined sugar and its by-products; molasses and bagasse.
Jauharabad Sugar Mills is majorly owned by a Holding Company - Cane Processing (Pvt.) Limited (64%) and individuals of the Latif family (23%). The Company has a free float of 10%.