VIS Reaffirms ER Of SSML

KARACHI, (UrduPoint / Pakistan Point News - 4th Feb, 2022 ) :VIS Credit Rating Company Limited has reaffirmed the entity ratings of Sheikhoo Sugar Mills Limited at single A minus/A-Two. Outlook on the assigned ratings is stable.

Previous rating action was announced on Dec. 29, 2020, said release on Friday.

Ratings reaffirmation continues to factor in SSML's sound operating track record of more than two decades, sizeable crushing capacity and healthy financial indicators along with diversified revenue stream from steel segment (billets plants commencing operations from Feb'.2020).

The reaffirmation has also incorporated continued sponsor support as exhibited by extending interest-free loans for working capital requirement. The risk profile of sugar sector is high given inherent cyclicality in crop levels and raw material prices while with respect to steel sector, ratings are exposed to both local and international demand cyclicality and foreign exchange risk.

The ratings further take note of developments with regards to penalties imposed by CCP on certain sugar mills and legal proceedings for interim relief initiated by the subject company.

However, in the meanwhile, uncertainty of the outcome would persist on the sector. The material impact of penalty imposed (amounting to Rs 1.4 billion) on SSML will be significant and hence VIS will continue to monitor further development in this matter.

The company has planned to go for value-addition in steel segment by establishing a steel melting and re-rolling mill (with annual stated capacity of ~150,000 MT). At present, the project has a completion status of 80% and the mill is expected to commence operations in the ongoing year. The high-pressure boiler along with steam turbine is already in the installation phase to meet energy requirement of the re-rolling mill. The management has also expressed interest in doubling the production capacity of re-rolling mill through installation of 400 MT furnace in the medium term.