Karachi: VIS Credit Rating Company Limited (VIS) has maintained the entity ratings of Shahmurad Sugar Mills Limited (SSML) at ‘A/A-2’. The medium to long-term rating stands at ‘A’ and the short-term at ‘A-2’, indicating a stable credit quality with good protection factors and a sound likelihood of timely repayment. Notably, the outlook on these ratings has been upgraded to ‘Positive’ from ‘Stable’.

According to VIS Credit Rating Company Limited, the ratings reflect SSML’s solid position in the market with inelastic demand and low cyclicality, contributing to the company’s stable financial outlook. SSML, incorporated on April 9, 1979, operates sugar and ethanol manufacturing units in Sindh, and is listed on the Pakistan Stock Exchange. The positive change in outlook aligns with the company’s improved financial risk profile, marked by revenue growth in the sugar and ethanol segments during the fiscal year 2023 and the third quarter of 2024.

The company benefits from higher average selling prices for sugar and increased ethanol sales, influenced by the devaluation of the Pakistani Rupee and sugar exports under allocated quota. Despite challenges such as increased sugarcane costs and high seasonality affecting the industry, SSML’s diversification into ethanol and strategic inventory management have bolstered its gross margins. However, the company remains cautious about the future due to potential pressures from rising finance costs and the cyclical nature of sugarcane supply.

Looking ahead, SSML aims to navigate through these challenges by focusing on operational efficiencies and maintaining robust capital, coverage, and liquidity profiles, which are crucial for sustaining and possibly improving its credit ratings in future assessments.