Press Release

VIS Maintains Entity Ratings of Al-Noor Sugar Mills Limited

Karachi, August 26, 2024: VIS Credit Rating Company Limited (VIS) maintains entity ratings of Al-Noor Sugar Mills Limited (‘ANSML’ or ‘the Company’) at '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 likelihood of timely repayment of short-term obligations with sound short-term liquidity factors. Outlook on the assigned ratings has been revised from ‘Negative’ to ‘Stable’. Previous rating action was announced on August 23, 2023.

ANSML is part of Al-Noor Group (‘ANG’ or ‘the Group’) and is primarily engaged in the business of manufacturing and sale of sugar. The Company also operates a medium density fiber board (MDFB), the first in Pakistan, as well as a power generation unit. The production facilities are located at District Shaheed Benazirabad and Noushero Feroze in the Province of Sindh and are spread over a total area of 207.22 acres of land.
Assigned ratings reflect ANSML’s medium business risk profile, characterized by inelastic demand, low cyclicality, and lower inherent technology risk. The Company's diversification into ethanol and low risk of substitute products provide stability in a fragmented market. However, the industry faces challenges such as high seasonality, increasing sugarcane costs, and sensitivity to fluctuations in sugarcane production and quality, which introduces risks related to raw material availability. Change in outlook is supported by the strong group profile of the Company, providing comfort to the assigned ratings.

Assigned ratings also take into account the financial risk profiles including profitability, capitalization, liquidity, and coverage. The profitability profile was supported primarily due to higher average selling prices for sugar and sugar exports under allocated quota. Capitalization has shown signs of improvement, attributable to improvement in management of short-term debt. Liquidity remains aligned with industry norms despite challenges in the cash conversion cycle driven by inventory buildup. The coverage profile has seen improvements, reflecting effective debt management strategies, although it remains a focus area for further enhancement.

Going forward, the sugar industry faces several financial and business risk indicators that could impact the assigned ratings. These include the pressure from elevated finance costs and the stagnation of sugar prices due to inventory build-ups. The dependency on favorable government policies for exports and managing the cyclicality of sugarcane supply will also be important for the assigned ratings. Improvement in operational efficiencies and the maintenance of capital, coverage and liquidity profiles despite prevailing challenges will be major considerations for future reviews.

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 .