February 19, 2024 (MLN): The VIS Credit Rating Company Limited (VIS) has assigned an initial rating to Tariq Corporation Limited (PSX: TCORP) of ‘BBB’ for long term and ‘A-3’ for short term with a stable outlook forecast, the latest press release issued by VIS showed.
The medium to long-term rating of ‘BBB’ denotes adequate credit quality; protection factors are reasonable and sufficient. Risk factors are considered variable if changes occur in the economy.
The short-term rating of ‘A-3’ indicates satisfactory liquidity and other protection factors qualify entities /issues as to investment grade. Risk factors are larger and subject to more variation. Nevertheless, timely payment is expected.
TCORP, formerly Husein Sugar Mills Limited, is a public limited company listed on the Pakistan Stock Exchange, specializing in sugar production and its by-products. Incorporated in Karachi in 1966, TCORP's operations are based in Jaranwala, near Lahore and Faisalabad.
Ratings incorporate business risk profile of sugar sector characterized by high cyclicality, medium competition, capital intensity and technology risk, low energy sensitivity and high regulatory risk.
Amidst lower sugarcane availability and a shorter crushing period in MY23, sugar production was recorded lower.
Despite that, net sales in MY23 improved due to an increase in average sugar prices and a rise in the quantity of sugar sold, owing to a sizeable carry-over stock sold during the period.
As a result of inventory gains and higher margins on exports, gross margins improved significantly.
While finance costs increased during MY23, the higher gross profits trickled down to support the Company’s bottom line, translating into higher net margins.
Resultantly, with an increase in funds from operations, liquidity and cash flow coverage has improved, albeit in line with peers.
Management and sponsors have demonstrated commitment to enhancing the Company's operational capabilities through a significant capital expenditure plan, which is expected to be operational by the end of MY24.
This investment is anticipated to bolster the Company's output and financial performance in the medium to long term.
Historically, the company’s gearing and leverage ratio has remained on the higher side when compared to peers.
Going forward, sustained improvement in capitalization and liquidity profile along with the successful implementation of the expansion project will remain important for ratings.
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Posted on: 2024-02-19T11:55:08+05:00
