Press Release
VIS Assigns Initial Entity Ratings to Tariq Corporation Limited
Karachi, February 19, 2024: VIS Credit Rating Company Limited (VIS) has assigned the initial entity ratings of ‘BBB/A-3’ (Triple B / A-Three) to Tariq Corporation Limited. (‘TCORP’ or the ‘Company’). The medium to long-term rating of ‘BBB’ denotes adequate credit quality; protection factors are reasonable and sufficient. Risk factors are considered variable if changes occur in the economy. The short-term rating of ‘A-3’ indicates satisfactory liquidity and other protection factors qualify entities /issues as to investment grade. Risk factors are larger and subject to more variation. Nevertheless, timely payment is expected. Outlook on the assigned ratings is ’Stable’.
TCOPR, formerly Husein Sugar Mills Limited, is a public limited company listed on the Pakistan Stock Exchange, specializing in sugar production and its by-products. Incorporated in Karachi in 1966, TCOPR's operations are based in Jaranwala, near Lahore and Faisalabad. The registered office is located in Gulberg III, Lahore.
Ratings incorporate business risk profile of sugar sector characterized by high cyclicality, medium competition, capital intensity and technology risk, low energy sensitivity and high regulatory risk. Amidst lower sugarcane availability and a shorter crushing period in MY23, sugar production was recorded lower. Despite that, net sales in MY23 improved due to an increase in average sugar prices and a rise in the quantity of sugar sold, owing to a sizeable carry over stock sold during the period. As a result of inventory gains and higher margins on exports, gross margins improved significantly. While finance costs increased during MY23, the higher gross profits trickled down to support the Company’s bottom line, translating into higher net margins. Resultantly, with an increase in funds from operations, liquidity and cash flow coverage has improved, albeit in line with peers.
Management and sponsors have demonstrated commitment to enhancing the Company's operational capabilities through a significant capital expenditure plan, which is expected to be operational by the end of MY24. This investment is anticipated to bolster the Company's output and financial performance in the medium to long term. Historically, the Company’s gearing and leverage ratio has remained on the higher side when compared to peers. Going forward, sustained improvement in capitalization and liquidity profile along with successful implementation of expansion project will remain important for ratings.
For further information on this rating announcement, please contact the undersigned (Ext. 201) at 021-35311861-64 or email at info@vis.com.pk
Javed Callea
Advisor
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