Pakistan Credit Rating Agency maintains entity ratings of AL-Abbas sugar mills limited

Lahore, June 10, 2015 (PPI-OT): The Pakistan Credit Rating Agency (PACRA) has maintained the long term and short term entity ratings of Al-Abbas Sugar Mills Limited (AASML) at ‘A’ (Single A) and ‘A1′(A One) respectively. The ratings denote a low expectation of credit risk emanating from a strong capacity for timely payment of financial commitments. The ratings reflect AASML’s significant positioning in its core business segments – sugar and ethanol.

While sugar is characterized by stable demand supported by fundamentals, ethanol takes benefit of the value addition that it signifies as a product. Although margins are thin in sugar due to structure of domestic industry, revenues of ethanol division support profitability. The company’s financial profile becomes stretched during crushing season, owing to working capital related sizable borrowings.

Nevertheless, adequate cash flows and largely stable coverages provide relief to it. Moreover, with approaching full repayment of long term debt; the company’s financial profile would get strength. The ratings continue to take support from the company’s seasoned management team, having sound understanding of the industry dynamics. In order to further diversify its revenue stream, AASML has built a storage terminal at port; this has added stable rental income.

The company owns a small power plant for which it is negotiating power purchase agreement with K-Electric. This should add another stable revenue stream. The management is also exploring possibility of setting up a bagasse based power plan. The ratings are dependent on the sustained risk profile of the company. Herein, business volumes and related margins are important. Deleveraging and addition of stable revenue streams are likely to positively impact the ratings.

For more information, contact:
Hammad Rashid
Analyst
The Pakistan Credit Rating Agency Limited (PACRA)
Awami Complex, FB1, Usman Block New Garden Town,
Lahore – Pakistan
Tel: +9242 586 9504 -6
Fax: +9242 583 0425
Email: hammad.rashid@pacra.com
Web: www.pacra.com