AsiaNet-Pakistan Premier Editorial Content and Press Release Distribution Service
Karachi, January 10, 2020 (PPI-OT): VIS Credit Rating Company Limited (VIS) has assigned initial entity ratings of ‘A-/A-2’ (Single A Minus/A-Two) to Etihad Sugar Mills Limited (ESML). The medium to long-term rating of ‘A-’ denotes good credit quality with adequate protection factors. Moreover, risk factors may vary with possible changes in economy. The short-term rating of ‘A-2’ denotes good certainty of timely payments coupled with sound liquidity and fundamental protection factors. Outlook on the assigned rating is ‘Stable’.
The ratings assigned to ESML take into account moderate business risk profile of the company, largely underpinned by ample experience of sponsors led management in the sugar sector and sizeable crushing operations. The ratings derive comfort from considerable improvement in net sales, profit margins and cash flows during the outgoing year, mainly on account of notable increase in sucrose recovery rate and higher sugar prices in the domestic and international markets. The ratings incorporate notable growth in FFO generation, mainly on the back of higher profits during the period under review, which resulted in slight improvement in coverages.
In addition, the ratings reflect improvement in leverage indicators during the period on the back of augmentation of equity base. The aforementioned indicators are still on the higher side, though management has plans for further improvement, going forward. The ratings are constrained on account of cyclicality inherent in the sugar sector impacting the overall business risk profile of the company from time to time. Further, ratings will remain dependent upon sustenance of margins and profitability indicators coupled with 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
Email: bilal@jcrvis.com.pk
Website: https://www.vis.com.pk/