Karachi, December 17, 2021 (PPI-OT):VIS Credit Rating Company Limited (VIS) has reaffirmed the entity ratings of Alliance Sugar Mills Limited (ASML) at ‘A-/A-2’ (Single A Minus/A-Two). Long-term rating of ‘A-’ signifies good credit quality with adequate protection factors. Risk may vary slightly from time to time because of economic conditions. Short-term rating of ‘A-2’ depicts good certainty of timely payment where liquidity factors are sound and good access to capital markets. Outlook on the assigned ratings is ‘Stable’. Previous rating action was announced on November 12, 2020.
Ratings reaffirmation continues to factor in ASML’s satisfactory operating track record, extensive experience of sponsors in the sugar sector and adequate financial metrics. The risk profile of sugar sector is high given inherent cyclicality in crop levels and raw material prices. While narrow demand and supply dynamics may lead to high sugar prices, risk of government intervention to control prices is expected to remain intact.
During the period under review, ASML changed its legal status from ‘Private Limited’ to ‘Public Limited’ Company along with increase in its authorized share capital. The ratings have incorporated the developments with regards to penalties imposed by CCP on certain sugar mills and its non-applicability on the subject company as confirmed by management. However, in the meanwhile, uncertainty of the outcome would persist on the sector. VIS will continue to monitor further development in this matter.
The limited growth in sales revenue during the outgoing year is largely attributable to lower volumetric sales of sugar while operating margins have depicted weakening on account of sizeable jump in average sugarcane procurement cost and ratio of sugarcane cost to gross sugar sales. Bottom-line was significantly supported by mark up income from associate and reduction in financial charges owing to lower average utilization of running finance. Healthy cash flow generation over the review period has supported the overall liquidity profile. Nevertheless, current ratio was recorded below 1.0x indicating room for improvement. Leverage indicators have improved on account of profit retention policy and repayments of long-term debt. Ratings remain dependent on the cyclicality of sugarcane production and prices along with maintenance of threshold financial indicators.
For more information, contact:
Director Compliance and Rating Analytics,
VIS Credit Rating Company Limited
VIS House, 128/C, 25th Lane off Khayaban-e-Ittehad,
Phase VII, DHA, Karachi, Pakistan
Tel: +92-21-35311861-72
Fax: +92-21-35311873
Email: bilal@jcrvis.com.pk
Website: https://www.vis.com.pk/