Shahtaj Sugar Mills : Transmission of Quarterly Report for the Period Ended 31-03-2022

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Directors' Report to the Members

Your Directors have pleasure in presenting the un-audited condensed interim financial statements for the six month period ended 31 March 2022.

Operational performance of the present crushing season as compared with that of last year is produced below:

After crushing available sugarcane of our own area as well as from adjoining areas, we were able to produce 91,603 M. Tons of sugar i-e higher by about 12.84% than last season. We endeavored our best to procure maximum sugarcane from the outside areas to maximize the production and could succeed due to significant increase in sugarcane crop for the season because of increase in sugarcane cultivation area in Punjab and better yield. In this season, almost 23% of sugarcane had to be purchased from outside areas.

The Government of Punjab increased support price for the season from Rs. 200/- to Rs. 225/- per 40 kg. In order to maximize production almost every mills in our region was in price war, resulting excess payment than the government support price to sugarcane growers. This season cost to procure the sugarcane - basic raw material ended at Rs. 240.83 per 40 Kg against Rs.

268.42 per 40 Kg of the previous season of 2020-2021. This is almost 10.28% less as compared with the last season. There was decrease in sugarcane recovery percentage from 9.64% to 8.88% in this season due to the climatic conditions for this year that enforced poor sucrose content in the sugarcane planted in our area. However, the cost to produce sugar is slightly less than the previous period due to reduced cost of sugarcane procured as compared to previous season.

Sugar prices during the six month period were better than the corresponding period specially during the 1st quarter of the financial year due to shortage of sugar in the market. Further molasses prices during the period under review were lesser as compared to corresponding period due to low international prices of ethanol.

For the six month period, your Company recorded a turnover of Rs. 3,630.642 million as against Rs. 3,374.376 million in the corresponding period of 2021. The cost of sales was Rs.3,080.510 million as against Rs. 3,011.771 million of the corresponding period. Thus, the Company has a gross profit of Rs. 550.132 million for the six month period ended 31 March 2022 as against a gross profit of Rs. 362.605 million of the corresponding period. The net profit has been recorded to Rs. 148.112 million against the profit of Rs. 75.412 million of the corresponding period. The profit was due to better sugar prices and lower cost of basic raw material i.e. sugarcane for the season 2021-22. The finance cost for the period was Rs. 173.610 million as against Rs. 104.991 million of the corresponding period due to high utilization of banking facilities and increase in policy rate.

For the three month period ended 31 March 2022, your Company recorded a turnover of Rs. 2,067.293 million as against Rs. 2,527.974 million in the corresponding period of 2021. The cost of sales was Rs.1,818.707 million as against Rs. 2,268.874 million of the corresponding period. Thus, the Company has a gross profit of Rs. 248.586 million for the three month period ended 31 March 2022 as against a gross profit of Rs. 259.100 million of the corresponding period. The net profit has been recorded to Rs. 40.778 million against the profit of Rs. 57.616 million of the corresponding period. The profit was less as compared to previous quarter of last year due to depressed sales prices of sugar and molasses. The finance cost for the period was Rs. 117.687 million as against Rs. 92.695 million of the corresponding period.

UPDATE ON POWER PROJECT:

As informed earlier we are in the process of setting up a Bagasse based Power Project of installed gross capacity of 32 MW with 15 MW spillover to the National Grid. Two steam turbines of generation capacity of 16MW each have been installed successfully. Work on the construction of Switch Yard of 132 KV is in progress. Further, your Company has been granted Generation License and Upfront Tariff for 30 years by National Electric Power Regulatory Authority (NEPRA).

We had negotiated and finalized the Energy Purchase Agreement (EPA) with Central Power Purchasing Agency (CPPA) which was subsequently approved by the Board of Directors of CPPA. The EPA could not be executed on account of the decision of the Cabinet Committee on Energy (CCoE), that only those projects shall be implemented where either the Implementation Agreement (the "IA") or EPA has been signed. Consequently, the Company along with five (5) other Bagasse Based Cogeneration power projects filed writ petitions in the Honorable Islamabad High Court in 2018 against Federation of Pakistan, CPPA (G) L, NEPRA and others against the impugned decision of Cabinet Committee on Energy (CCoE).

During the pendency of our writ petition, the Government modified the earlier decision of CCoE and decided that all those projects which have been granted LOS by AEDB will be permitted to proceed towards the achievement of their requisite milestones as per RE Policy, 2006. However, if more than one year has elapsed since determination of tariff by NEPRA, the said tariffs would be reviewed by NEPRA and that NEPRA will review the same to make it consistent with the current market environment/conditions/consumer interest and such review will include appropriate time extensions to reach financial closing.

Now, NEPRA has reviewed and modified our tariff dated January 02, 2017, and awarded revised/modified tariff vide its determination dated January 24, 2022. We are waiting for the Gazette Notification of the tariff. We are hopeful that EPA will be signed after Gazette Notification by the Power Division.

Your Directors place on record their appreciations of the diligence and devotion of duty of the Officers, Members of Staff and Workers of all categories.

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