KARACHI:VIS Credit Rating Company Limited has reaffirmed the entity ratings of Fatima Sugar Mills Limited at 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 repayment, sound liquidity factors and good company’s fundamentals. Outlook on the assigned ratings is stable. The previous rating action was announced on Nov.17, 2020, said release on Friday.
FSML is a part of ‘ Fatima Group’, a large conglomerate operating in the country, having business interests in fertilizer, textile, energy, sugar, and commodities trading sectors.
FSML is mid-sized sugar mill with overall crushing capacity of 11,500 tons per day. The company sells refined sugar and molasses both in the local and international markets, though no exports were made during 9 months of fiscal year 2020-21.
Growth in net revenue was a function of higher volumetric sales for all the key products and improved sugar selling price during nine months 2020-21. However, profit margins declined as the impact of higher sugar price was more than offset by increase in sugarcane procurement price, decrease in sucrose recovery rate owing to early start of crushing season, and lower selling price of molasses in the absence of any export opportunities.
Weakness in profit margins needs to be arrested to avert the developing pressure on rating drivers. Funds from operations were recorded in line with the profits, which along with the lower interest payment resulted in improved debt service coverage ratio by ending 9 months the last financial year.
Meanwhile, decrease in FFO -to-total debt ratio was led by higher short-term borrowings for working capital requirements and mobilization of new long-term loan for capex.