Karachi, April 26, 2022 (PPI-OT):VIS Credit Rating Company Limited (VIS) has reaffirmed the entity ratings of Almoiz Industries Limited (AMIL) at ‘A/A-2’ (Single A/A-Two) with a ‘Stable’ outlook. The medium to long-term rating of ‘A’ denotes good credit quality coupled with adequate protection factors. Moreover, risk factors may vary with possible changes in the economy. The short-term rating of ‘A-2’ denotes good certainty of timely payment coupled with sound company fundamentals and liquidity factors. The previous rating action was announced on February 1, 2021.
AMIL is part of an industrial conglomerate, ‘Almoiz Group’ engaged in the businesses of beverages, sugar, steel, power and textile. AMIL is primarily engaged in manufacturing and sales of sugar, steel deform bars and electricity. The business risk profile of the company draws comfort from diversified operations. The sugar production facility is based on multi-feedstock; the plant can use both sugarcane and beetroot as a raw material to produce sugar. The plant therefore remains operational for a relatively longer period. The sugar units operate on self-generated electricity. In MY22, sugarcane production in the country is estimated to be ~11% higher than the preceding period due to increase in area under cultivation on account of favourable weather conditions and higher economic returns. Sugar production is also estimated to increase in tandem with higher cane production and largely intact recovery rates. However, the ratings do incorporate inherent cyclicality in crop levels and price vulnerability in sugar sector.
During MY21, growth in topline was mainly led by better sugar prices along with some increase in quantity and higher contribution from steel segment. Despite notable increase in average selling prices of key products, gross margins decreased mainly on account of higher raw material prices of both sugarcane and scrap for billets. The ratings draw strength from adequate liquidity position underpinned by healthy cash flows in relation to outstanding obligations. The capitalization is supported by profit retention and continued support from sponsors in the form of interest free and unsecured loan. Presently, the company is in process of enhancing its steel billet plant capacity and setting up another beetroot plant at Unit-II. The additional capacity of steel plant is expected to come online by end-June’22 while beetroot project is expected to start trial production shortly.
The company has obtained additional long-term borrowings to fund these projects. However, despite increase in borrowings, leverage indicators are projected to remain at manageable level on the back of equity expansion. Going forward, the growth in topline would be largely driven by enhanced operations which may further strengthen overall risk profile of the company. Maintaining liquidity and capitalization profiles at comfortable levels would remain imperative for the assigned ratings. Meanwhile, VIS will continue to monitor developments related to imposed penalty by Competition Commission of Pakistan and any other matter. Any negative decision by the court of law will be incorporated in the rating action accordingly.
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
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