Karachi: VIS Credit Rating Company Limited has reaffirmed the entity ratings of RYK Mills Limited at ‘A/A-2’, signaling stable credit quality with a positive outlook for the medium to long-term and a sound short-term financial health.

According to VIS Credit Rating Company Limited, RYK Mills, incorporated in 2007 and with facilities in Rahim Yar Khan, has maintained its ratings thanks to its diversified business model, including the production of sugar, ethanol, and electricity. The medium to long-term rating of ‘A’ reflects the company’s good credit quality with adequate protection factors, though these could shift with economic conditions. The ‘A-2’ short-term rating indicates a strong likelihood of timely financial obligations being met, supported by solid liquidity.

The positive outlook is supported by RYK Mills’ strategic responses to the current surplus sugar stock and pressures on pricing within the industry. Efforts to secure additional export allocations are underway as the new crushing season approaches, a key factor for the company’s ongoing stability and growth. Furthermore, the company’s shift towards ethanol production and favorable conditions for sugar exports have bolstered its revenue and gross margins, despite a squeeze on net margins from rising finance costs.

Looking ahead, the company is expected to benefit from an increase in ethanol exports and tariff revisions in the power sector by NEPRA, which should contribute to margin improvements. An anticipated reduction in interest rates is also expected to positively affect the bottom line. While gearing and leverage ratios are currently high, these are projected to improve with the expected increase in profitability across the power and ethanol segments.