The Pakistan Credit Rating Agency Limited
08-May-19
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
This press release is being transmitted for the sole purpose of dissemination through print/electronic media. The press release may be used in full or in part without changing the meaning or context thereof with due credit to PACRA
PACRA Upgrades Entity Ratings of Al-Abbas Sugar Mills Limited
| Rating Type | Entity | |
|
Current (08-May-19 ) |
Previous (06-Nov-18 ) |
|
| Action | Upgrade | Maintain |
| Long Term | A+ | A |
| Short Term | A1 | A1 |
| Outlook | Stable | Positive |
| Rating Watch | - | - |
The ratings reflect the Company's diversified revenue stream, emanating from sugar, ethanol and storage facilities, mitigating volatility risk associated with the sugar industry. Margins in the industry have been depressed lately due to a persistent supply glut and substantial carry over stock. Sugar prices have been improving recently, providing relief to a certain extent. However, despite volatile market conditions, the Company has been able to sustain healthy margins owing to efficient operations and diversification. Well thought investment in storage tank terminals provides an additional cushion to cashflows throughout the year. Ratings draw strength from the Company’s robust governance framework and strong financial profile represented by a modestly leveraged capital structure, strong coverages and efficient management of working capital. The upgrade signifies the Company’s consistent performance and resilience to adverse movements in the sugar industry.
The ratings are dependent on the Company's ability to sustain its margins and healthy coverages while maintaining necessary cushion and discipline in working capital management. Significant deterioration of relationship between shareholders leading to adverse impact on the Company's profile and/or excessive borrowings resulting in declining coverages will have a negative impact on ratings.
About
the Entity
Al-Abbas Sugar Mills Limited was incorporated in May 1991 and is listed on Pakistan Stock Exchange. The Company has diversified businesses of sugar, ethanol and storage tank terminal. The business include a) Sugar capacity of 7,500 M. tons per day, b) Ethanol-capacity 172,500 liters per day, and c) Storage tank terminal-capacity of 22,850 M. tons per month. It operates in two different locations at Mirpurkhas and Dhabeji in Sindh. 58% of Al-Abbas Sugar's shareholding lies with Haji Ghani Group, which enjoys strong presence on the Board and management control. Jahangir Siddiqui (JS) group (27%) is the other major shareholder. Mr. Zakria Usman acts as the Chairman of the Board, whereas, Mr. Asim Ghani serves as the Chief Executive Officer.