Suhail Jute Mills says political, economic uncertainties behind inability to start commercial operations

Suhail Jute Mills Limited (SUJH), engaged in the manufacturing and sale of jute products, said the company has been unable to sell its land due to “severe political and economic uncertainties prevailing in the country, especially in Khyber-Pakhtunkhwa”, adding that this is the main reason behind its inability to start commercial production.

The listed company, which at the time is registered as a defaulter, shared the development in its progress report for the quarter ended 30 June 2024 to the Pakistan Stock Exchange (PSX) on Tuesday.

“As reported from time to time, the company has assets that have become available for disposal as a consequence of the merger of (Colony) Sarhad Textile Mills Ltd, with and into, Suhail Jute Mills Limited. Additionally, the company owns a fully functional jute manufacturing facility, which has been maintained in running order,” the company said in its filing.

SUHJ said that the existing unit is capable of generating revenue, once working capital becomes available, and commercial production recommences.

“However, the restart of commercial operations hinges entirely upon our ability to raise adequate financing for working capital and the settlement of outstanding obligations to creditors, including institutions who have secured decrees from the courts,” it shared.

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The company informed that it has a plan for land development involving conversion of existing land to smaller sized industrial plots.

“This proposal entails the outright sale of 20 acres of land for approximately Rs480 million, with the funds generated from the sale applied to the costs of converting 576 kanals of land into industrial plots of different sizes and it was estimated that the proceeds from the sale of plots would be approximately Rs2.5 billion,” read the statement.

The company said that as indicated in the plan, the physical infrastructure required to divide the subject land into plots requires funding, which, was planned to be generated by the outright sale of a parcel of land of 20 acres.

“This amount would be sufficient to cover the most pressing and immediate liabilities and leave the company with sufficient margin to raise working capital for reviving commercial operations.”

Moreover, the plotting and sale of land would not impact the existing jute manufacturing and ancillary facilities which remain intact, it said.

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“(However) despite our best efforts, there was no meaningful progress in respect of the sale of land during the quarter under report,” the company said.

“This is due primarily to the severe political and economic uncertainties prevailing in the country and especially in Khyber-Pakhtunkhwa,” it said.

The company stated that due to high mark-up environment and budget uncertainties, investors still appear unwilling to enter into long term commitments involving large amounts of financial resources.

It said that the principal sponsors are substantially increasing their financial stake in the company and have injected further funds to keep the company afloat during the period under report.

The company added that the management is making “strenuous efforts to materialize the plan so as to generate the necessary funds to sustain and revive the commercial operations”.