Al-Abbas Sugar Mills Limited (‘Al-Abbas Sugar’ or ‘the Company’) is a public listed company, incorporated in May 1991.

The company began its journey with the manufacturing and sale of white refined sugar, commencing commercial operations in December 1993. Expanding its business portfolio, the company established its first distillery plant (Unit I) in 2000, followed by a second unit (Unit II) in 2004, enhancing its ethanol production capacity. To further strengthen its supply chain and operational efficiency, the company later developed storage terminals, ensuring better inventory management and logistical support.

The Company's has a rated crushing capacity stands at 8,500 TCD and the distilleries have a combined capacity to produce 170,000 liters of Ethanol per day (Unit I: 85,000 Liters; Unit II: 85,000 Liters). The Company has diversified businesses and operates in two different locations at Mirpurkhas and Dhabeji in Sindh. The businesses include a) Sugar, b) Ethanol c) Chemicals and Alloys and d) Tank Terminal. In terms of production performance, Al-Abbas sugar recorded sugar production of 50,184 MT during the fiscal year MY24. This marks an increase of ~18% compared to the 42,175 MT produced in MY23, demonstrating a steady improvement in operational efficiency and output. The Company operated for 83 crushing days during the year, which is indicative of an efficient operational period. Additionally, the sugar recovery rate, which measures the amount of sugar extracted from the sugar cane, remains stable at ~10.26% in MY24. This improvement in recovery rate can largely be attributed to favorable moisture content in the sugar cane crop, which enhances the efficiency of the extraction process and leads to a higher yield of sugar from the raw material. The ethanol segment recorded the production of 43,603 MT ~3.6% lower than 45,250 MT as compared to previous year. The Company also operates 12 tanks, having a combined storage capacity of 22,850 MT per month to store ethanol and petroleum products.

The majority shareholding in the company is held by the Haji Ghani family and its associates, who own 33%, followed by the Jahangir Siddiqui (JS) Group with 29%. Additionally, 10% of the Company’s shares are publicly traded, contributing to market liquidity and investor participation.

The two major shareholders of the Company are involved in a long standing dispute since 2013. Legal proceedings in this regard are being carried out in Sindh High Court and outcome is pending. However, the management believes that the case will be decided in the favor of the Company

The sponsors, Haji Ghani Group, have a strong and established business track record. Mr. Haji Abdul Ghani brings extensive experience, having chaired the Boards of various brokerage firms and previously serving as the Vice Chairman of the Pakistan Stock Exchange. Additionally, the Haji Ghani Group has a diversified business background, with prior involvement in the cement sector, further demonstrating its expertise in managing and expanding industrial ventures.

The Company is the flagship entity of Haji Ghani Group and has maintained stable profits over the years supported by a sufficient equity base of PKR 8bln as at Sep-24. Moreover, the group serves as a strong financial backbone. The sponsors possess sufficient financial strength to support the Company in times of distress, ensuring stability, continuity, and resilience against market fluctuations.

The Board of Directors (BoD) consists of nine members, including one Executive Director and three Non-Executive Directors. It also includes three Independent Directors and two Female Directors, ensuring diversity and governance balance. The BoD is chaired by a Non-Executive Director and is predominantly influenced by the Haji Ghani Family, which holds a strong presence through five Nominee Directors.

The Board of Directors (BoD) comprises highly experienced members with strong professional backgrounds, specializing in financial services as well as the sugar and ethanol industries. Their collective expertise enhances strategic decision-making and corporate governance. Mr. Muhammad Suleman Chawla currently serves as the Chairman of the BoD, providing leadership and oversight to the board’s functions.  

The Board of Directors (BoD) is supported by three key committees: the Audit Committee, the HR & Remuneration Committee, and the Risk Management Committee. Mr. Haroon Askari, an Independent Director, chairs both the Audit and HR & Remuneration Committees, ensuring transparency and effective governance. Meanwhile, the Risk Management Committee is chaired by Mr. Salman Hussain Chawala, also an Independent Director, overseeing risk assessment and mitigation strategies to safeguard the company's financial and operational stability.

BDO Ebrahim & Co. Chartered Accountants as Company's external auditors. The firm is classified in category ‘A’ of SBP and have a satisfactory QCR rating. They have expressed an unqualified opinion on the financial statements for the year ending in Sep-24.

Al-Abbas Sugar has a well-defined organizational structure, ensuring efficient management and clear reporting lines. Department heads report directly to the CEO, facilitating streamlined decision-making and accountability. The company operates through five key departments: Finance, Administration & Human Resources, Procurement & Purchase, Audit, and Plant Operations, each playing a crucial role in maintaining operational efficiency and business growth.

Mr. Asim Ghani has been serving as the CEO since December 2017. Prior to this role, he oversaw the operational aspects of Al-Abbas as an Executive Director and has been associated with the company for 23 years, bringing extensive industry experience and leadership. Similarly, Mr. Samir Hajani, the Chief Financial Officer, has been with the company for the past 11 years, contributing to its financial stability and strategic growth. The long-standing association of the senior management ensures policy consistency, operational continuity, and a strengthened management structure.

The long association of the Company’s senior management ensures consistency in overall policies and strengthens the management structure.

The Company has deployed Oracle R-12 as its ERP system, enabling it to generate various reports for effective management and decision making.

The Internal Audit Department upholds compliance and operational efficiency by conducting quarterly evaluations to assess risks, controls, and adherence to policies. The findings are reported to the Audit Committee, ensuring transparency, accountability, and continuous improvement in governance and internal processes.

Pakistan’s sugar industry stands as the second-largest agro-based sector in the country, comprising approximately90 mills with an annual crushing capacity of 80-90 million MT. Despite its scale, the industry faces persistentchallenges, particularly due to the Government-regulated sugarcane support prices, which are set based onfarmer’s costs and often constrain millers' profitability. In MY23, sugar production declined by approximately 15%,reaching 6.7million MT, primarily due to the devastating floods that damaged standing crops and reduced therecovery rate. To manage the surplus inventory, the Government permitted the export of 0.5 million MT of sugar,offering some relief to the industry. The current MY24 season also reflects the lingering effects of flash floods, with a 4.7% loss in cultivated area. Despite these setbacks, sugar production is estimated to recover slightly toaround 7 million MT. The Government’s continued support for exports is expected to provide a much-needed boostto millers, helping them navigate challenging industry dynamics and mitigate financial pressures.

Owing to numerous industry players, companies relatively have low market share. Al-Abbas Sugar contributes ~ 0.7% to the total sugar production and~ 6% to the total ethanol production of Pakistan.

The Company generates revenue by manufacturing and selling sugar (~28%) and ethanol (~72%). A geographical split of revenue indicates that ~30% is generated from the local market, while the remaining ~70% originates from exports. During MY24, the Company's total topline increased by ~13%, reporting to PKR 16 billion compared to PKR 14 billion in the corresponding period of the previous year MY23. Out of this revenue from sugar recorded at PKR 4.2bln (MY23: PKR 3.8bln) and revenue from ethanol recorded at PKR 11bln (MY23: PKR 10.2bln) This growth was driven by an increase in the sale price per kg, which rose from PKR 91/kg in MY23 to PKR 112/kg in MY24. Looking ahead, revenue stability is anticipated, underpinned by resilient local market demand for sugar. Additionally, the Company's financial performance improved due to sugar exports, amounting to PKR 11,440mln, which contributed positively to its results.

The Company's profitability margins reflect a deteriorated performance during MY24. The gross profit margin fell to ~21.9% (MY23: ~34.1%). This decline was primarily driven by a substantial increase in the procurement cost of sugarcane, which had a direct negative impact on the cost of production. Higher sugarcane costs reduced the overall margin from the core business operations, making it more difficult to sustain profitability at the same levels as in the previous year. This translated into a shrinking Operating profit margin (~13.4%, down from ~30.2%). Moreover, during MY24, the net profit margin contracted to 9.4% from ~25.3%. This decline is primarily attributed to a decline in the net income during the year. Additionally, the decline is primarily attributed to a substantial increase in finance costs, which rose to ~36.8%, reflecting the impact of elevated borrowing costs in a high-interest-rate environment.

Going forward, the Company performance will largely depend on the sugar division, and its industry dynamics. Meanwhile, the Company is expected to continue it’s stable performance in ethanol division.

The Company’s working capital management has shown signs of operational inefficiencies during MY24. Inventories witnessed an increase, averaging 98 days compared to 87 days in MY23, driven by high levels of finished goods. Trade receivables remain negligible at 10 day on average, underscoring the Company’s efficient receivables collection practices. However, trade payables averaged 24 days, from 26 days in MY23, indicating adequate utilization of supplier credit. Despite this, the Gross Working Capital cycle lengthened to 108 days (MY23: 96 days), resulting in a Net Working Capital cycle of 84 days compared to 70 days in the previous period. Leverage indicators present a stable picture, with Short-Term Total Leverage remaining neutral at 62% (MY23: 51%) and Short-Term Trade Leverage recorded to 58% from 35%, reflecting more room to borrow against trade assets. Going Forward, the working capital cycle is expected to improve due to the efficient selling of stock through export.

The Company's coverage indicators reflect a mixed performance during MY24, highlighting challenges in its financial risk profile. The EBITDA-to-Finance Cost ratio has declined to 4.8x (MY23: 12.5x), signaling a reduced capacity to cover finance costs through operational earnings. Similarly, the FCFO-to-Finance Cost ratio has weakened to 3.7x from 11.4x, indicating tighter cash flow coverage of financial obligations. Debt repayment timelines remains (0.0x from 0.0x) reflecting Company’s ability to timely payoff its obligations. Going forward, coverages are expected to ease resulting due to lower finance cost.

Al-Abbas Sugar Mills maintains a low-leveraged capital structure, which is a good sign in comparison to other industry players, with a debt-to-equity ratio standing at ~24.4% in MY24 (MY23: ~28.5%). The Company's debt consists of short-term borrowings, constituting ~99%, and long term borrowing, constituting lease liabilities of ~1% of the total debt. In MY24, the total debt of the Company stood at PKR 2,584mln due to increased utilization for running finance for working capital purposes and repayment of loan. The equity base of the Company stood at ~PKR 8,001mln (MY23: ~PKR 6,923mln).