Press Release
VIS Reaffirms Entity Rating of Alliance Sugar Mills Limited
Karachi, June 17, 2025: VIS Credit Rating Company Limited (VIS) has reaffirmed the medium to long-term rating of Alliance Sugar Mills Limited (“ASML” or “the Company”) at ‘A-/A2’ (Single A Minus/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 'A2' indicates a good likelihood of timely repayment of short-term obligations with sound short-term liquidity factors. Outlook on the assigned rating has remained ‘Stable’. Previous rating review was conducted on February 07, 2024.
ASML is a public unlisted company incorporated in Pakistan in 2011. The Company is engaged in production and sale of sugar and its by-products. ASML operates as a wholly owned subsidiary of RYK Mills Limited (‘RYKML’ or ‘the Holding Company’). The Company’s registered and head office (‘HO’) is located at Lahore while the manufacturing unit is located at Ghotki, Sindh.
Assigned ratings reflect medium-risk profile of the sugar sector in Pakistan, characterized by stable demand dynamics, seasonal and cyclical production, government intervention, and exposure to price and interest rate fluctuations. Sugarcane cultivation remains geographically concentrated and cyclical, increasing procurement challenges and cost volatility. Regulatory changes, including the discontinuation of the minimum support price policy, have shifted procurement dynamics. Despite inelastic demand, driven by population growth and industrial use, mill clustering in cane-growing regions intensifies competition for cane procurement. Sector fundamentals remain under pressure due to weather-related production disruptions, lower sucrose recovery in the 2024–25 crushing season, and a domestic supply shortfall. Ratings also account for the group profile of the Company.
Assigned ratings also incorporate the financial risk profile of the Company for MY24 and 1HMY25. A net loss was recorded in MY24 due to elevated sugarcane costs, low sugar prices, holding of sugar sale and high finance costs in a challenging monetary environment. Profitability improved in 1HMY25, supported by gains on carryover sugar inventory amid rising sugar prices and declining interest rates. Leverage and gearing increased over the period, driven by higher borrowings from banks, while the Holding Company provided operational and working capital support. Coverage metrics weakened in MY24 but showed partial recovery in 1HMY25 due to lower finance costs. Liquidity remains adequate and aligned with the assigned ratings. Favorable sugar pricing and declining interest rate trend are expected to improve profitability going forward.
Going forward, ratings will remain sensitive to the Company’s ability to manage gearing and leverage levels in light of elevated short-term borrowings. Improvements in coverage and liquidity metrics, along with developments in working capital management, will also be monitored from the ratings perspective. Assigned ratings will also remain underpinned by the availability of financial support from the parent company, as and when required.
For further information on this rating announcement, please contact at 021-35311861-64 or email at info@vis.com.pk.
Applicable Rating Criteria:
Corporate Rating
https://docs.vis.com.pk/docs/CorporateMethodology.pdf
VIS Issue/Issuer Rating Scale
https://docs.vis.com.pk/docs/VISRatingScales.pdf