Press Release

VIS Reaffirms Entity Ratings of Madina Sugar Mills Limited

Karachi, August 13, 2024: VIS Credit Rating Company Limited (VIS) reaffirms entity ratings of Madina Sugar Mills Limited (‘’MSML’’ 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 remains Stable. Previous rating action was announced on June 16, 2023.

MSML was incorporated on February 23, 2007 as a private limited company under the Companies Ordinance, 1984 and later in March 2014, converted to a public unlisted company. The principal activity of the Company is production and sale of white crystalline sugar. The Company also has a distillery for the manufacturing / extraction of ethanol. The registered office of the Company is situated in Karachi whereas the mill / distillation plant is situated at Chiniot, Punjab, Pakistan.

The assigned ratings reflect MSML’s medium business risk profile, supported by the industry’s inelastic demand, lower cyclicality, modest capital requirements, and a medium level of technology risk. The ratings also take into account the Company’s diversification strategy, which includes the existing ethanol segment and lately added steel mill, thereby providing additional revenue sources. The ratings, however, factor in seasonality in sugarcane production, as well as risks related to rising sugarcane prices, which impacts raw material availability and costs.

The ratings also reflect the Company’s financial risk profile for MY23 and 1HMY24, marked by a reduction in revenue growth due to lower sales across all segments. In MY23, gross and net margins improved as higher sugar prices offset increased sugarcane procurement costs and operational expenses remained under control. However, in 1HMY24, margins declined due to stabilizing sugar prices and higher finance costs. The latter also weakened the coverage profile. While capitalization profile was stable in MY23, it weakened in 1HMY24 due to increased drawdown of short-term debt to meet the seasonal working capital requirements. Higher drawdown of short-term debt also weakened the liquidity profile.

Going forward, the ratings will remain sensitive to the efficient management of MSML’s profitability, coverage, capitalization, and liquidity profile.

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 .