Press Release

VIS reaffirms Entity Ratings of Etihad Sugar Mills Limited

Karachi, December 06, 2021: VIS Credit Rating Company Limited (VIS) has reaffirmed entity ratings of ‘A-/A-2’ (Single A Minus/A-Two) to Etihad Sugar Mills Limited (ESML). The medium to long-term rating of ‘A-’ denotes good credit quality with adequate protection factors. Moreover, risk factors may vary with possible changes in economy. The short-term rating of ‘A-2’ denotes good certainty of timely payments coupled with sound liquidity and fundamental protection factors. Outlook on the assigned rating is ‘Stable’. Previous rating action was announced on November 19, 2020.

The ratings assigned to ESML take into account sufficient experience of sponsors in the sugar sector and sizeable crushing operations. Sponsors have continued to support the company in the form of interest free loans. The ratings incorporate improvement in MY20 profitability profile being a function of higher sales revenue led by increasing retail prices and other income emanating from markup income on loan to related subsidiaries. Going forward, VIS expects margins and profitability to remain a function of average retail prices of sugar in the coming years. improvement in profit margins mainly on back of increase in retail prices of sugar. Liquidity profile remained largely intact supported by notable increase in FFO leading to improvement in debt service coverage. While gearing and debt leverage remained on higher side at end-June’21 to finance working capital requirements, they remain within manageable levels. The company has made investment in 74MW bagasse-based power project, Etihad Power Generation Ltd., with a stake of 49%. Once operational, the power project is expected to support the operations and cost inputs of the entity. The ratings have incorporated the developments with regards to penalties imposed by CCP on certain companies and an appeal filed by the subject company wherein they expect a favorable decision. However, in the meanwhile the uncertainty of the outcome of the penalty imposed would persist on the sector. Ratings remain dependent on the cyclicality of sugarcane production and prices along with maintenance of threshold financial indicators and a favorable outcome of the imposed penalty (Rs. 1.6b on ESML) wherein it does not materially impact the risk profile of the company.

For further information on this rating announcement, please contact Ms. Asfia Aziz and/or the undersigned at 021-35311861-66 (Ext. 306) or email at info@vis.com.pk.


Faryal Ahmad Faheem
Deputy CEO

VIS Entity Rating Criteria: Corporates (August 2021)
https://docs.vis.com.pk/docs/CorporateMethodology202108.pdf

Information herein was obtained from sources believed to be accurate and reliable; however, VIS Credit Rating Company Limited (VIS) does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information.VIS , the analysts involved in the rating process and members of its rating committee do not have any conflict of interest relating to the rating(s)/ranking(s) mentioned in this report.VIS is paid a fee for most rating assignments. This rating/ranking is an opinion and is not a recommendation to buy or sell any securities. Copyright 2021 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .