Press Release
VIS Reaffirms Entity Ratings of Almoiz Industries Limited
Karachi, September 13, 2024: VIS Credit Rating Company Limited (‘VIS’) has reaffirmed the entity ratings of Almoiz Industries Limited (‘AMIL’ or ‘the Company’) at 'A/A-2' (‘Single A /A-Two’). Medium to long term rating of 'A' indicates good credit quality; Protection factors are adequate. Risk factors may vary with possible changes in the economy. Short-term rating of 'A-2' suggests good likelihood of timely repayment of short-term obligations with sound short-term liquidity factors. Outlook on the assigned ratings is ‘Stable’. Previous ratings action was announced on August 02, 2023.
AMIL, incorporated in Pakistan on May 5, 2005, is an unlisted public company engaged in the seasonal manufacturing of sugar and allied products from sugar beet and sugarcane. The Company also produces dehydrated food items and deform steel bars, utilizing in-house generated power. Almoiz operates plants in Dera Ismail Khan (Sugar Unit-I, Steel Unit and dehydration unit) and Mianwali (Sugar Unit-II and Food Unit), with its head office and a branch office in Lahore. AMIL specializes in the manufacturing and sale of sugar and steel deform bars. Its sugar production facility is designed to handle both sugarcane and beetroot. The sugar mills operate from November to April on sugarcane and from April to June on beetroot, compared to conventional mills that use only sugarcane. AMIL is a part of the Almoiz Group, which operates in beverages, sugar, steel, power, and textiles. The group's other companies include Naubahar Bottling Company (Pvt.) Limited – the largest franchiser of Pepsico in Pakistan, The Thal Industries Corporation Limited (TICL) – sugar mills and an IPP, Wiztec Food Solutions (Private) Limited and Moiz Textile Mills Limited – a spinning mill. The group is the sole producer of sugar from beetroot in Pakistan.
Assigned ratings incorporate moderate business risk profile of the sugar industry in Pakistan, characterized by low exposure to economic cyclicality and notable impacts from seasonal variations. This includes the influences of fluctuations in sugarcane production and quality, compounded by cyclicality in crop yields and raw material prices. The competitive risk within the sugar sector is considered from medium to low, with minimal threat of substitutes due to the essential nature of sugar albeit high industry fragmentation.
Assigned ratings also take into account the financial risk profile of the Company. Despite observed improvements in profitability, there are concerns regarding the sustainability of these margins due to cost pressures from inventory holdings and softening of sugar price. Easing of export restrictions may provide some relief. Capitalization has weakened, influenced by increase in short-term debt, while liquidity remains adequate despite an extended cash conversion cycle. Coverage ratios have shown some recovery in 1HMY24, although remain sensitive to the Company’s profitability profile amid an elevated interest rate environment.
Going forward, key business and financial risk indicators that could impact the assigned ratings include the continued rise in sugarcane prices and the management of procurement costs. Dependency of the ratings on the continued management of these benchmarks underscore sensitivity of the ratings to any potential weakening in these areas. Ratings will remain sensitive to improvement in profitability, coverage, liquidity and capitalization profiles amid prevailing market conditions.
For further information on this ratings announcement, please contact on 021-35311861-64 or email at info@vis.com.pk.
Applicable Rating Criteria:
Industrial Corporates
https://docs.vis.com.pk/docs/CorporateMethodology.pdf
VIS Issue/Issuer Rating Scale
https://docs.vis.com.pk/docs/VISRatingScales.pdf