MEHRAN SUGAR MILLS LIMITED Half Yearly Report March 31, 2022
m e h r a n s u g a r . c o m
Half Yearly Report March 31, 2022
DIRECTORS' REPORT
On behalf of the Board, I am pleased to present financial results for the half year ended March 31, 2022.
Operational Highlights | March 2022 | March 2021 |
Crushing - M. Tons | 856,944 | 682,253 |
Sucrose Recovery | 11.16% | 10.72% |
Sugar Production - M. Tons | 95,642 | 73,092 |
Molasses production - M. Tons | 40,185 | 31,880 |
Molasses Recovery | 4.69% | 4.67% |
Financial Highlights | March 2022 | March 2021 |
(Rupees in Thousand except EPS) | ||
Turnover | 2,591,242 | 2,785,581 |
Sales tax | 271,764 | 302,968 |
Gross Profit | 668,157 | 567,413 |
Gross Profit margin | 28.81% | 22.86% |
Profit before tax | 298,187 | 406,856 |
Profit before tax margin | 12.86% | 16.39% |
Net Profit after tax | 173,626 | 298,909 |
Net Profit margin | 7.49% | 12.04% |
Earnings per share | 3.23 | 6.11 |
Following factors were primarily responsible for our operational and financial results:
- Sucrose recovery improved to 11.16% from 10.72% of previous year. Primary reason for improvement was relatively better and consistent crushing. In addition, prudent cane procurement with improvement in gate area supplies also accounted for improvement in recovery. Due to the larger crop, mills were able to crush cane in March, which allowed for more mature cane with higher sucrose recovery to be crushed.
- Gross profit margin increased due to lower cane procurement cost and better sucrose recovery. Good volume of molasses and Bagasse sales also allowed for this contribution.
- The Bagasse savings improved substantially as compared to last year because of further investments made in steam efficiency and electrical savings. The company continues to invest in efficiency with the goal to saving large volumes of bagasse, which is now an important feedstock for other industries.
-
Unicol's share of profit continue to remain impressive and amounted to
Rs.167.59 million during this period. - Dividend income from equity investments amounted to Rs. 58.06 million which more than doubled as compared to corresponding period of last year. This was larger due to the defensive nature of investments, which were switched to higher yielding investments. However, a large loss of Rs. 109 Million was booked
Mehran Sugar Mills Ltd. | 1 |
on account of lower valuations of investments due to the prevailing economic condition.
- Finance costs also increased substantially due to a higher utilisation of short-term borrowings as our quantity of sugarcane crushed increased. An approximate 75 percent increase in the cost of borrowing from last year also played a major impact.
SEASON 2021-2022
Season 2021-2022 was expected to be a larger crop compared to the previous 3 years. However, the GoS increased the minimum support price by 24 percentage from the previous year to Rs.250/40kgs plus QP. This became an anomaly since the price of sugar cane in Punjab was notified at Rs. 225/- 40 Kgs. Such a large price difference of 10 percentage in one country created difficulty for mills in Sind.
Despite the higher crop expectations sugarcane harvesting remained slow in the first month as growers were used to price wars in the previous 3 years and thus expected favorable prices. This prompted an unusual and abnormal increase in sugarcane price up to 30 percentage higher than the support price announced by the government.
This initial increase in pricing subsided as the season progressed. An improved supply brought stabilization in sugarcane price. However, due to the higher notified price and initial market buying the overall cost of cane in Sind remained higher than Punjab.
Further prompt payments to growers created large requirement of liquidity. This along with increase in mark up rates has increased our finance cost and thus the overall cost of sugar production. The finance cost due to short-term working capital requirements has now become a major cost component after sugarcane and salaries.
In season 2021-2022, the production of sugar closed at 7.9 million Tons as compared to 5.7 million Tons last season. The final sugar production was 38 percentage higher than the previous year. This production has been recorded as the highest ever in the history of sugar production in Pakistan. Pakistan's sugar consumption is expected at approximately 6.5 million Tons.
The highest ever production has created a surplus of approx. 1.5 Million Tons. Sadly timely export permission is not being given due to the political uncertainty in the country. The exports of sugar can not only bring in valuable foreign exchange of approximately USD 1.0 Billion but also more importantly stabilise sugar prices at Rs. 90/ kg, which are important to allow an equilibrium pricing between sugarcane and sugar prices for this year.
Rebalancing the requirement of sugar and thus stabilising the market is also imperative considering that the season 2023 initial survey points to a slightly larger crop size, which would again mean a surplus. In such a season ensuring sustainable sugarcane prices to the farmer are critical so that overall sugar production numbers do not reduce in Pakistan.
Your mill was able to produce 95,642 Tons as compared to 73,092 Tons which was 31 percent higher than the year before.
2 | Mehran Sugar Mills Ltd. |
UNICOL LIMITED
The Company's performance continued to be robust and satisfactory during the period. Both Ethanol and CO2 plants remained efficient. Due to the initial European gas crisis followed by the political turmoil in Ukraine and sky rocketing oil prices, demand for ethanol has remained strong which has improved selling price of ethanol.
The larger sugarcane allowed Molasses purchases at competitive prices during the season. This phenomenon enabled the company to secure its sales commitments for the entire year.
Profit before tax for Unicol was Rs. 585 million as compared to Rs.485 million in the same period last year. The profitability for the remaining half of the year is expected to substantially improve considering higher ethanol pricing and better currency valuations.
Unicol continues to pay a quarterly dividend, which augurs well for our cash flows.
Following are the key data related to Unicol Ltd:
Financial Highlights | Units | March 2022 | March 2021 |
Sales | Rs. in '000 | 3,898,256 | 4,046,217 |
Gross profit | Rs. in '000 | 780,969 | 764,538 |
Gross profit % | % | 20.03% | 18.90% |
Profit before tax | Rs. in '000 | 585,097 | 485,943 |
Profit after tax | Rs. in '000 | 502,784 | 445,087 |
Net profit % | % | 12.90% | 11% |
Earnings per share | Rs. | 3.35 | 2.97 |
UNI-FOOD INDUSTRIES LIMITED
The FMCG business has been badly hit since the emergence of Covid and subsequent inflation and currency devaluations. Lower demand due to closure of educational institutions, malls and shopping centres and consequent non-absorption of fixed overheads has put the company in continued losses. Also lower ability to pass through costs due to a competitive marker have been a major challenge.
Despite the challenges, sales have shown an encouraging trend in the last six months. Presently the board in coordination with the management is considering various options for the future of the company. Our equity investment in Unifoods has reached to Rs. 446.35 million. All options are being reviewed for the future of the company and our investment.
FUTURE OUTLOOK
Grower friendly policies during last three years have resulted in better returns on the crop. Hence, we are seeing continuous improvement in plantation of sugarcane. This trend is welcoming and needs to be continued. However, the major focus of the industry has to be towards improving farm productivity and yields as availability of additional land for farming is limited. An improved farm yield will allow larger volume of sugarcane. This would improve farmer economics and allow mills to attain better capacity utilization in years to come.
Mehran Sugar Mills Ltd. | 3 |
This is an excerpt of the original content. To continue reading it, access the original document here.
Attachments
- Original Link
- Original Document
- Permalink
Disclaimer
Mehran Sugar Mills Ltd. published this content on 31 May 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 31 May 2022 09:19:08 UTC.
