Press Release

VIS Upgrades Entity Rating of Shahmurad Sugar Mills Limited

Karachi, August 23, 2023: VIS Credit Rating Company Limited (VIS) has upgraded the medium to long-term entity rating of Shahmurad Sugar Mills (SSML) to ‘A’ (Single A) from ‘A-’ (Single A Minus). The short-term rating has been maintained at ‘A-2’ (A-Two). The medium to long-term rating of ‘A’ denotes good credit quality; protection factors are adequate. Risk factors may vary with possible changes in the economy. The short-term rating of ‘A-2’ denotes 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 is ‘Stable’. Previous rating action was announced on June 6, 2022.

SSML is a part of Al-Noor Group, involved in the manufacturing sugar, rice, ethanol, power and fiberboard products along with presence in the financial sector. Production facilities of SSML include sugar and ethanol manufacturing units located at Jhok, District Sajawal in the province of Sindh. The ratings incorporate extensive sponsors experience in the sugar sector, satisfactory operating track records and financial flexibility in view of diversified revenue stream. Total sugarcane production in 2022-23 season was reported lower at 82.4m MT vis-à-vis 89.0m MT in the preceding year on account of adverse impact on sugarcane crop due to floods. Resultantly, according to sources, sugar production in the country has reported a decrease of ~7%. However, total available sugar stocks are expected to remain largely intact vis-à-vis preceding year. Meanwhile, the Government allowed 250,000 MT of exports due to surplus sugar inventory available in the country in the ongoing year. The ratings do incorporate inherent cyclicality in crop levels and price vulnerability in sugar sector leading to competitive challenges for the company. The ratings also take note of the stay orders granted on penalties imposed by Competition Commission of Pakistan (CCP) on certain sugar mills. VIS will continue to monitor further development in this matter.

In MY22, the company’s revenue growth was largely driven by increase in ethanol export sales, comprising nearly three-fourth of the revenue mix, on the back of higher volumetric sales and selling price. Similarly, during 1H’MY23, there was considerable improvement in gross and net profitability primarily resulting from higher contribution margin of company’s distillery operations. Positive demand dynamics of ethanol underpinned by increasing trend towards its blending with gasoline fuels in international market and export competiveness due to PKR devaluation has boded well for local industry players. Sugar prices have also showed an upward trajectory largely in line with inflationary pressure. Hence, sugar segment margins are also expected to improve in full year. Further, the ratings draw support from adequate liquidity profile as reflected by significant improvement in cash flows in relation to outstanding obligations during MY22 and the ongoing year. Leverage indicators have remained at manageable levels on a timeline basis. Meanwhile, the ratings will remain dependent on maintaining debt servicing capacity, capitalization and profitability profile, going forward.

For further information on this rating announcement, please contact Ms. Tayyaba Ijaz, CFA (042-35723411-13, Ext. 8005) and/or the undersigned at 021-35311861-64 (Ext. 207) or email at

Sara Ahmed

Applicable Rating Criteria: Industrial Corporates (May 2023)

VIS Rating scale

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 2023 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .