Press Release

VIS Reaffirm Entity Ratings of Adam Sugar Mills Limited

Karachi, May 21, 2024: VIS Credit Rating Company Limited (VIS) reaffirms entity ratings of Adam Sugar Mills Limited (‘’ASML’’ or ‘’the Company’’) to 'A-/A-2' (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 'A-2' indicates good certainty of timely payment. Liquidity factors and company fundamentals are sound. Access to capital markets is good. Risk factors are small. Outlook on the assigned ratings remains Stable. Previous rating action was announced on June 12, 2023.

Adam Sugar Mills Limited, formerly known as Bahawalnagar Sugar Mills Limited, was established in October 1965 under the Companies Act, 1913, subsequently replaced by the Companies Ordinance, 1984, and later by the Companies Act, 2017. Over its nearly six-decade history, ASML has focused on the manufacturing and sale of sugar and its by-products. Initially operating with a capacity of 1,500 TCD (tonnes of cane per day), the Company has steadily expanded, currently boasting a capacity of 16,000 TCD. The Adam family holds majority stake in ASML, actively participating in its management and supervision. Headquartered in Karachi, ASML's production unit is situated in District Bahawalnagar, Punjab.

Assigned ratings incorporates the medium business risk profile of ASML, supported by the industry’s moderate barriers to entry, capital-intensive nature, and low inherited technology risk. However, industry’s cyclicality with the production of sugarcane possess raw material availability risk while inelastic demand linked with the growing population provides assurance to the assigned ratings.

The ratings also take into account the Company's financial risk profile in MY23 with sustained sale revenue, attributed to higher sugar prices though the volumetric sales experienced a decline. With no change in sales, a decline in gross margin occurred due to higher sugarcane procurement prices, while the net margin saw improvement due to reduced tax incidence. The coverage profile was marginally affected by increase in the finance cost and lower profit before tax. Despite the increase in the long term, debt acquired for balancing, modernization, and replacement (BMR) activity, gearing improved due to higher profit retention, while leverage slightly rose due to higher proportion of trade payables. The liquidity position however remains adequate. Moreover, improvement in the Company’s 1QFY24 financial metrics further bolster the assigned ratings.

Going forward, the ratings of the Company will remain contingent on further improvement in its financial metrics as well as the outcome of the pending litigation with the Competition Commission of Pakistan (CCP).

For further information on this ratings announcement, please contact at 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

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 2024 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .