Islamabad: Sugar millers have announced a record-breaking 78% surge in profits for the financial year 2022-23, reported The Express Tribune.
The sugar sector, which is publicly traded, witnessed a substantial increase in profitability for the fiscal year 2023 (FY23), spanning from October 2022 to September 2023. The sector’s net profit soared by 78% year-on-year (YoY), reaching an unprecedented high of Rs22 billion. This remarkable earnings growth is primarily attributed to the upswing in sugar prices, resulting in higher gross margins.
Additionally, the ethanol segment, a by-product of sugar, also demonstrated improved performance in FY23. This enhancement was propelled by favorable ethanol selling prices in the international market and the devaluation of the rupee against the dollar.
The net sales of the sugar sector also experienced a noteworthy surge, rising 29% YoY to Rs304 billion in FY23. This growth was driven by the export of 249,000 tonnes of sugar and a 28% increase in average domestic prices throughout the year.
A significant development in FY23 was the government’s decision in January 2023 to permit the export of 250,000 tonnes of sugar, with the condition that dollar proceeds would be recovered from sugar exporters within 60 days from the opening of the letters of credit (LCs). As reported by the Pakistan Bureau of Statistics (PBS), the sector exported 249,000 tonnes in FY23. The opening up of exports exerted pressure on domestic prices, causing a substantial increase from Rs88/kg in October 2022 to Rs166/kg in September 2023. However, these prices have since declined and are currently at Rs147/kg, according to PBS.
The sector’s selling and distribution expenses also increased by 38%, in line with the rise in volumetric sales and the prevailing inflationary environment.
However, the finance cost has posed a constraint on the earnings growth of the sugar sector, rising by 60% YoY to Rs18 billion in FY23, up from Rs11 billion in FY22. This significant rise is primarily due to higher interest rates and increased borrowing for working capital. Shahmurad Sugar Mills emerged as the top performer, with profits of Rs3,828 million (18% of the total sector profit), followed by Al-Abbas Sugar Mills with Rs3,686 million (17% of the total sector profit), and Habib Sugar Mills with Rs2,541 million (12% of the total sector profit) in FY23.
Notably, some companies recorded higher net profit margins compared to their peers, mainly due to the superior performance of their ethanol segments. This was driven by better ethanol selling prices in the international market and the devaluation of the rupee against the dollar.
The analysis encompassed 20 listed sugar companies that disclosed their financial results, out of a total of 23 companies. Abdullah Shah Ghazi Sugar, Chashma Sugar Mills, and Premier Sugar Mills have not yet announced their results, but it’s estimated that adding these three companies would not materially impact the overall profitability growth trend. The analysis also excluded five companies categorized as defaulters: Ansari Sugar Mills, Dewan Sugar Mills, Haseeb Waqas Sugar Mills, Sakrand Sugar Mills, and Shakaranj Limited.
