Press Release

VIS Upgrades Entity Rating of Etihad Sugar Mills Limited

Lahore, February 21, 2024: VIS Credit Rating Company Limited (VIS) has upgraded the medium to long-term entity rating of Etihad Sugar Mills Limited (ESML) from ‘A-’ (Single A Minus) to ‘A’ (Single A) while maintaining short-term rating at ‘A-2’ (A Two). The medium to long-term rating of ‘A’ signifies 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 payments. Liquidity factors and company fundamentals are sound. Outlook on the assigned rating is ‘Stable’. Previous rating action was announced on October 25, 2022.
ESML is engaged in manufacturing and sale of white crystalline sugar along with by-products. The company is headquartered in Lahore, with a manufacturing facility in Karamabad, District Rahim Yar Khan. Total sugarcane production in 2022-23 season was reported lower at 82.4m MT vis-à-vis 89.0m MT in the preceding year mainly due to heavy floods in the country. Sugar prices were consistently under pressure throughout the outgoing crushing season due to excessive sugar stocks available in the country while the Government allowed 250,000 MT of exports in the outgoing year. However, there was a significant surge in sugar prices after the season's conclusion, primarily in line with inflationary trends. Retail sugar prices, while remaining relatively elevated, have recently exhibited a downward trend due to the Government intervention aimed at reducing smuggling. Meanwhile, given higher indicative prices of sugarcane for the upcoming crushing season and lower available sugar stocks in the country, it is expected that sugar prices may increase, going forward. Nonetheless, the ratings do incorporate inherent cyclicality in crop levels and price vulnerability in sugar sector leading to competitive challenges for the company.
Revision in rating takes into account the projected growth in financial metrics from core business and contribution from investment in diversified associates. It also captures significant growth in topline in the outgoing year driven by both price and volumetric increase, coupled with export sales of molasses which further contributed to the topline. Margins and profitability for the year were supported by higher turnover and inventory gains, despite higher financial expenses. The debt service coverage has remained adequate on a timeline basis. Leverage indicators have also exhibited improvement on account of both lower borrowings and enhanced equity base. During the outgoing year, the company secured long-term loans to provide funds to its associate, Etihad Alloys (Pvt.) Limited (EAPL) and receives interest income from the same. The management anticipates receiving incremental income, once its associates commence operations, which is expected by end-Dec’24.
Going forward, the ratings are underpinned to the achievement of the projected financials and/or sponsors support to maintain the key margins, capitalization and profitability ratios at the projected level; a shortfall in these would be considered a credit negative event.
For further information on this rating announcement, please contact the undersigned at 042-35723411-12 (8008) or email at

Maimoon Rasheed

Applicable Rating Criteria: Industrial Corporates

VIS Issue/Issuer Rating Scale

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