Sugar Production and Financial Performance Improve at Mehran Sugar Mills

Karachi, Mehran Sugar Mills Limited has reported significant operational and financial improvements for the half year ended March 31, 2024. The sugar production surged to 97,384 metric tons from 85,796 metric tons in the previous year, and the sucrose recovery rate also increased slightly. Financially, the company saw a turnover rise to Rs. 3,915,478 thousand, up from Rs. 3,571,490 thousand in March 2023. The company’s net profit after tax escalated dramatically to Rs. 709,800 thousand, a substantial rise from the previous year’s Rs. 396,993 thousand.

The increase in sugar production is a part of a broader national increase, as Pakistan’s overall sugar output for the season surpassed last year’s, totaling 6.762 million metric tons. Despite higher sugarcane prices which rose by 50% due to increased competition among millers, Mehran Sugar Mills managed to increase its gross profit notably to Rs. 942,241 thousand from Rs. 380,581 thousand.

However, finance costs also rose significantly, from Rs. 305,007 thousand to Rs. 535,498 thousand due to the higher policy rate and extended holding period for finished goods. The company anticipates these financial charges might double as compared to the previous year due to current market conditions and large inventory holdings.

Unicol Limited’s new Sugar division reported a production of 60,481 metric tons. However, the company is facing significant challenges due to increased sugar prices and extended inventory holding periods which have led to a rise in working capital requirements. According to information available from the Pakistan Stock Exchange (PSX), the finance costs for Unicol Limited have climbed substantially, impacting the overall financial health of the company.

The ethanol segment is also under pressure with higher costs for molasses and lower selling prices for finished goods. The PKR strengthening against the USD has further squeezed margins. The potential benefits from reduced rate financing through the Export Refinance Facility for exports have nearly been nullified under the current financial conditions.

Looking forward, the company highlighted the need for governmental approval and allowance for sugar exports to ease the financial strain. Unicol anticipates this could provide much-needed margin benefits from the international market, helping to meet financial obligations timely and accumulate essential foreign exchange.