The Pakistan Credit Rating Agency Limited
Press Release


Ayesha Malik

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PACRA Maintains Entity Ratings of Noon Sugar Mills Limited

Rating Type Entity
(07-Nov-19 )
(08-May-19 )
Action Maintain Maintain
Long Term BBB BBB
Short Term A2 A2
Outlook Stable Stable
Rating Watch - -

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.

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's registered office located on Sarwar Road, Cantt, Lahore, whereas, the mill is located in Sargodha. The Company has the capacity to crush 9,000 tons of sugarcane and can produce 130,000 liters of ethanol per day.

During August, 2019, Mr. Malik Adnan Hayat Noon transferred 37% shareholding of the Company to his wife Ms. Tahia Noon. He now retains 1% ownership. Meanwhile, Mr. Salman Hayat Noon, his brother, continues to hold 20% stake, with associates holding 13%. The remaining shareholding is attributable to the general public. Moreover, Mr. Adnan resigned from the directorship of the Company. He was replaced by Mr. Saifullah Khan Noon (Non-Executive Director). Mr. K. Iqbal Talib acts as the Chairman of the Board. 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 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.