Press Release

VIS Reaffirms Ratings of Madina Sugar Mills Limited

Karachi, October 22, 2020: VIS Credit Rating Company Limited (VIS) has reaffirmed the entity ratings of Madina Sugar Mills Limited (MSML) at ‘A-/A-2’ (Single A Minus/A-Two). The medium to long-term rating of ‘A-’ denotes good credit quality coupled with adequate protection factors. Moreover, risk factors may vary with possible changes in the economy. The short-term rating of ‘A-2’ denotes good certainty of timely payment coupled with sound company fundamentals and liquidity factors. The previous rating action was announced on July 24, 2019.

The assigned ratings take into account MSML’s association with Madinah Group, having business stake in various sectors encompassing edible oils, sugar, ethanol, power generation, mass media and steel. The assigned ratings also factor in diversification by the company into ethanol business to curtail the impact of sugar sector cyclicality. Profit margins stood significantly higher during FY19 on account of higher proportion of ethanol sales entailing sizeable margins. Some decrease in margins was witnessed during 9MFY20 due to lower contribution of sugar segment. However, uptrend in retail prices of sugar and also ethanol rates on account of surge in demand for sanitizing products due to Covid-19 have boded well for the company. Debt service coverage has remained adequate. Further, the ratings draw comfort from minimal reliance on long-term borrowings and comfortable gearing and leverage indicators. Meanwhile, the ratings are constrained due to inherent business risk present in sugar sector and any adverse changes in regulatory duties. Management of leverage and liquidity indicators along with additional contribution margins from the ethanol and sugar segments would be important, going forward.

For further information on this rating announcement, please contact Ms. Tayyaba Ijaz at 042-35723411-13 (Ext. 8004) and/or the undersigned at 021-35311861-66 (Ext. 306) or email at info@vis.com.pk



Faryal Ahmad Faheem
Deputy CEO


Applicable rating criterion: Corporates (May 2019)
https://www.vis.com.pk/kc-meth.aspx

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