Press Release

VIS Reaffirms Entity Ratings of RYK Mills Limited

Karachi, September 19, 2024: VIS Credit Rating Company Limited (VIS) has reaffirmed entity ratings of RYK Mills Limited’s (‘’RYKML’’ or ‘’the Company’’) at ‘A/A-2’ (Single A/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' suggests good likelihood of timely repayment of short-term obligations with sound short-term liquidity factors. Outlook on the assigned ratings is ‘Positive’. Previous rating action was announced on October 05, 2023.

RYKML is a public limited company incorporated in 2007. The Company’s registered office is located in Lahore Cantt, while its manufacturing facilities are situated in Rahim Yar Khan, Punjab. RYKML's business activities include the production and sale of sugar, ethanol, related by-products, as well as the generation and sale of electricity. Alliance Sugar Mills Limited (‘’ASML’’) is the wholly owned subsidiary of RYKML.

Assigned ratings incorporate the business risk profile of the sugar sector, characterized by low exposure to economic cyclicality, but high sensitivity to sugarcane production levels and quality. Currently, the industry is facing the challenge of surplus sugar stock, which has kept prices under pressure. With the new crushing season approaching, industry players are seeking additional export allocations, the outcome of which will remain important.

Ratings also takes into account the financial risk profile of the Company. The profitability in MY23 was supported by diversification into ethanol production and favorable sugar exports, resulting in improved revenue and gross margins. However, net margins were adversely affected by rising finance costs. Liquidity metrics have shown improvement, and coverage metrics remain adequate. Ratings draw comfort from projected profitability of the Company which is expected to increase as a result of growth in ethanol exports and tariff revisions by NEPRA in power segment, contributing positively to margin improvement. Anticipated reduction in interest rates is also expected to boost the bottom line. The gearing and leverage ratios, although high, are projected to improve with anticipated profitability increase power and ethanol segments. Going forward, timely reduction in sugar inventories, maintenance and subsequent improvement in margins and realization of power segment arrears will remain important rating considerations.

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 .