Press Release

VIS Reaffirms Entity Ratings of Two Star Industries (Pvt.) Limited

Karachi, August 20, 2021: VIS Credit Rating Company Limited (VIS) has reaffirmed the entity ratings of Two Star Industries (Pvt.) Limited at ‘BBB+/A-2’ (Triple BBB Plus/ A-Two). The medium to long-term rating of ‘BBB+’ denotes adequate credit quality; and adequate protection factors. Risk factors are considered variable if changes occur in the economy. The short-term rating of ‘A-2’ denotes good certainty of timely payments. Liquidity factors and company fundamentals are considered sound. Access to capital markets is good, risk factors are small. Outlook on the assigned ratings is ‘Stable’. The previous rating action was announced on May 16, 2020.

The assigned ratings take into account satisfactory operating track record, and extensive experience of sponsors in the sugar sector. Ratings also factor in the high business risk profile of the sugar sector given the inherent cyclicality in crop levels and raw material prices. Moreover, distortion in the pricing mechanism of raw material prices and refined sugar also creates challenges for sugar mills. While narrow demand and supply dynamics may lead to high sugar prices, government may intervene by importing sugar in order to control prices. Meanwhile, margins may also be curtailed by increasing trend in sugarcane prices.

Assessment of financial profile of the company reflects revenue enhancement during the outgoing year due to selling of carry-over stock. However, overall profitability profile depressed in MY20 largely because of lower gross margins attributable to inventory losses. Going forward, projected growth in profitability shall be contingent on timely selling of carry-over stock at attractive average selling prices. Liquidity profile is considered weak due to limited cash flow coverage vis-à-vis outstanding debt obligations while working capital cycle also has room for improvement. Moreover, leverage indicators are elevated vis-à-vis rating benchmarks however improvement in the same is expected in view of projected capital injection and profit retention. Ratings will remain contingent on improving cash flow coverages and leverage indicators. Also, VIS will continue to monitor developments regarding inquiries being conducted by ‘Inquiry Committee’, setup by the Prime Minister of Pakistan and will incorporate the outcome in ratings accordingly.

For further information on this rating announcement, please contact Ms. Asfia Aziz or the undersigned (Ext: 306) at (021) 35311861-66 or email at info@vis.com.pk.







Faryal Ahmad Faheem
Deputy CEO

Applicable Rating Criteria: Industrial Corporates (April 2019)
https://docs.vis.com.pk/docs/Corporate-Methodology-201904.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 2021 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .