Karachi: VIS Credit Rating Company Limited has reaffirmed the entity ratings of Tariq Corporation Limited at 'BBB/A3', indicating adequate credit quality with stable outlook. The company's ratings reflect the challenges and stability within Pakistan's sugar sector, influenced by various economic factors and regulatory measures.
Tariq Corporation Limited, originally established as Husein Sugar Mills Limited in 1966, operates in the production and sale of sugar and its by-products. Its shares are publicly traded on the Pakistan Stock Exchange Limited. The company, whose registered office is in Lahore, operates mills in Jaranwala, strategically located near key agricultural areas.
The reaffirmed ratings consider the inherent business risks of the sugar sector, characterized by seasonal production and regulatory interventions. Factors such as procurement competition and price volatility due to concentrated harvesting periods affect pricing and inventory decisions. Furthermore, the removal of minimum support pricing from 2024-25 could alter supply dynamics, while demand remains steady due to population growth.
Financially, Tariq Corporation faced a decline in revenue due to reduced production levels, despite an increase in average sugar prices. Profitability was impacted by higher raw material costs. However, deferred tax income provided some bottom-line support. The company managed its liquidity and coverage indicators under pressure from reduced operational profitability, aided by proceeds from asset disposals.
Short-term borrowings were kept in check as the company effectively managed its inventory, maintaining lower working capital needs compared to industry peers. Capitalization remained manageable, supported by limited debt reliance and a successful rights issue.
Future ratings for Tariq Corporation will depend on recovery in profit margins and maintaining a conservative capital structure. Adequate liquidity will also play a crucial role in sustaining the current ratings, as the company navigates the evolving economic landscape.