VIS Reaffirms Ratings of Etihad Sugar Mills Limited

Karachi, November 19, 2020 (PPI-OT): VIS Credit Rating Company Limited (VIS) has reaffirmed the entity ratings of Etihad Sugar Mills Limited (ESML) at ‘A-/A-2’ (Single A Minus/A-Two). 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 January 10, 2020.

The ratings assigned to ESML take into account ample experience of sponsors in the sugar sector and sizeable crushing operations. Sponsors have also supported the company in the form of interest free loans. The ratings incorporate improvement in profit margins mainly on back of increase in retail prices of sugar. Liquidity profile remained largely intact supported by notable increase in FFO leading to improvement in debt service coverage. While gearing and debt leverage remained on higher side, the latter decreased during the review period on account of lower trade and other payables.

The company has made investment in 74MW bagasse-based power project, Etihad Power Generation (Pvt.) Ltd., with a stake of 49%. Once operational, the power project is expected to support the operations and cost inputs of the entity. Meanwhile, the ratings remained constrained on account of high business risk emanating from inherent cyclicality in crop levels, raw material prices and any adverse changes in regulatory duties. Ratings will remain dependent upon maintenance of leverage indicators at lower than current levels, going forward.

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

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