Faran Sugar Mills Limited Reports Notable Shift in Financial Performance for the First Half of 2024

Karachi: Faran Sugar Mills Limited experienced a significant turnaround in its financial performance for the nine-month period ending June 30, 2024, overcoming previous losses to post a profit. According to the latest financial results, the company recorded a profit after taxation of Rs. 696.32 million, a stark contrast to the loss of Rs. 1,099.81 million reported during the same period last year.

Despite a 27.5% growth in gross sales primarily due to improved selling prices and increased volume of molasses and bagasse sales, the company faced challenges with a decrease in the refined sugar sales volume by 11%. This was attributed to a high carry-over stock and an increase in domestic sugar production. The expected selling price of sugar, initially projected to be between Rs 155 and Rs 160, was affected by oversupply issues and hesitant export permissions, leading to actual prices ranging from Rs 130 to Rs 140.

Operating profit rose to Rs. 624.29 million from Rs. 423.53 million, a significant improvement from the previous year. However, substantial finance costs, which nearly doubled due to heightened KIBOR rates and sluggish sales, continued to burden the company’s profitability. The share of loss from Unicol Limited also contributed to the financial strain, with a reported loss of Rs. 354 million.

According to information available from the Pakistan Stock Exchange (PSX), the sugar industry faces ongoing challenges, including high production costs and large stockpiles of surplus sugar estimated at over 1.5 million tons, valued at approximately US$ 1 billion. This surplus places additional pressure on the industry, compounded by delayed government actions regarding export permissions and subsidies.

Faran Sugar Mills highlighted that the long-standing issues with subsidies for inland freight from previous years remain unresolved, despite court orders to release funds. This situation has exacerbated the liquidity crisis faced by sugar mills across Pakistan.

As Faran Sugar Mills navigates these turbulent waters, the focus now shifts to government policymakers to take decisive actions that could stabilize the industry and leverage its potential to contribute significantly to Pakistan’s foreign exchange reserves through continuous sugar exports.