Karachi: VIS Credit Rating Company Limited (VIS) has reaffirmed the entity ratings of Madina Sugar Mills Limited (MSML) at ‘A-/A-2,’ reflecting good credit quality and a stable financial outlook despite prevailing economic variabilities. This decision comes after a comprehensive evaluation of the company’s financial and operational performance.

According to VIS Credit Rating Company Limited, the medium to long-term rating of ‘A-‘ suggests that MSML possesses adequate protection factors with good credit quality, although risks could arise with potential economic shifts. The short-term rating of ‘A-2’ underscores a strong likelihood of MSML meeting its short-term financial obligations due to robust liquidity factors. The outlook on these ratings remains stable, echoing the previous assessment announced on June 16, 2023.

MSML, which was incorporated on February 23, 2007, operates in the production and sale of white crystalline sugar and has expanded into ethanol extraction. Located in Chiniot, Punjab, the company has adapted to industry demands with diversifications, such as adding a steel mill segment. Despite the challenges of seasonal sugarcane availability and fluctuating prices impacting operational costs, MSML has managed to maintain a sound financial structure.

The financial profile for the fiscal year 2023 and the first half of 2024 indicates fluctuating revenue streams across its segments, with improved gross and net margins in 2023 offsetting rising costs. However, the first half of 2024 saw a dip in margins due to stabilizing sugar prices and increased finance costs, which also affected the company’s debt management and liquidity.

Future ratings for MSML will hinge on its ability to effectively manage profitability, cover financial obligations, maintain capitalization, and ensure liquidity, particularly in the face of market and economic shifts.