Lahore, May 07, 2019 (PPI-OT): The ratings draw comfort from strong acumen and support of new sponsors and management in the sugar industry. SGM Sugar has its mill located in Sindh with a crushing capacity of 8000TCD. The Company has recently been acquired by ‘United Group’ of Essarani family. The family has long standing experience in agriculture sector and commodity trading including trading in fertilizer and coal, operating a sugar mill (Sindh Abadgar’s Sugar Mills Limited) and ethanol distillery (United Ethanol Limited). Given the size of mill and steps taken by new management, a turnaround in operations is expected.
The Company did not engage in sales during 1QMY19 in expectation of better prices in the near future. The financial risk profile is characterized by highly leveraging, owing to loans obtained for debt re-profiling of the existing structure, with a thin equity base. The Company’s coverages are in a distressed situation for the period. However, planned activity for current crushing season and Sponsors’ commitment to provide financial support provides cushion for the Company. The ratings are dependent upon increasing capacity utilization and achieving operational efficiency envisaged by the management. Any further deterioration in margins and/or cashflows will negatively impact the ratings.
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Analyst
The Pakistan Credit Rating Agency Limited (PACRA)
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Lahore – Pakistan
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Email: hammad.rashid@pacra.com
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