Press Release

VIS Reaffirms Entity Ratings of Alliance Sugar Mills Limited

Karachi, December 30, 2022: 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; Protection factors are adequate. Risk factors may vary with possible changes in the economy. Short-term rating of ‘A-2’ depicts good certainty of timely payment; Liquidity factors and company fundamentals are sound. Access to capital markets is good. Outlook on the assigned is stable. Previous rating action was announced on December 17, 2021.

Assigned ratings incorporate satisfactory operating track record, extensive experience of sponsors in sugar sector and adequate financial metrics. The risk profile of sugar sector is high given higher opening inventory, increase in sugar cane prices, quantum of exports offtake, volatile demand supply dynamics leading to variation in prices and risk of government intervention to control prices is expected to remain intact. The ratings have incorporated the business risk associated with the industry during the current season wherein the negative impact risk of the same on financial performance would persist on the sector.

Assessment of financial profile reflects drop in topline during the outgoing year, attributable mainly to notable decrease in volumetric sales. Consequently, gross margins witnessed a dip. Profitability profile further deteriorated due to lower other income and increased finance cost resulting in negative bottom line during the outgoing year. Cash flow profile of the Company remained under stress with current ratio remained under 1x, indicating room for improvement. Capitalization indicators elevated despite the decrease in long-term borrowings as Company mobilized sizeable financing to meet its working capital requirements. Going forward, timely offloading of inventory in the local or export market, together with improvement in margins and capitalization indicators will remain important for ratings. Leverage indicators have, however, improved on account of profit retention policy and timely repayment of long-term loans. Further, business diversification in group companies (addition of distillery) is a positive factor to counter cyclicality of sugar business/industry.

For further information on this rating announcement, please contact Mr. M. Amin Hamdani (Ext: 217) or the undersigned (Ext: 207) at 021-35311861-71 or fax to 021-35311872-3.





Sara Ahmed
Director

Applicable Rating Criteria: Industrial Corporates (August 2021)
https://docs.vis.com.pk/docs/CorporateMethodology202108.pdf

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