Karachi: VIS Credit Rating Company Limited has reaffirmed the entity ratings of Al-Noor Sugar Mills Limited at ‘A-/A-2’, indicating good credit quality and a strong likelihood of timely debt repayments. The medium to long-term rating remains at ‘A-‘, suggesting adequate protection factors, while the short-term rating is ‘A-2’, reflecting sound liquidity factors. Importantly, the outlook on these ratings has been revised from ‘Negative’ to ‘Stable’, a positive shift from the previous assessment.

According to VIS Credit Rating Company Limited, the stable ratings reflect Al-Noor Sugar Mills’ medium business risk profile and its diversification efforts, including its ventures into ethanol production and power generation. These initiatives provide stability in a fragmented market, despite the industry’s high seasonality and sensitivity to sugarcane cost fluctuations. The ratings also acknowledge the strong backing of the Al-Noor Group, which enhances the company’s credit profile.

The financial health of Al-Noor Sugar Mills is supported by higher sugar prices and profits from sugar exports under the allocated quota, which have bolstered the company’s profitability. Additionally, improvements in capital management and debt strategies have strengthened the company’s capitalization and coverage profiles. However, challenges remain, particularly with liquidity, due to extended cash conversion cycles driven by inventory buildups.

Looking ahead, the ratings could be influenced by several factors, including rising finance costs and stagnant sugar prices due to excess inventory. The company’s ability to navigate government policies on sugar exports and manage the cyclical nature of sugarcane supplies will be critical. Continued focus on operational efficiencies and maintaining robust financial metrics amid these challenges will be pivotal for future rating assessments.