Noon Sugar Mills Limited was incorporated in 1964 as a public company listed on all the Stock Exchanges of Pakistan for setting up of a plant for the manufacture of white sugar in the province of Punjab. The plant went into production in 1966 with a daily crushing capacity of 1,500 MT of sugar cane, which has since been raised to 4,000 MT per day in 2002.
Further extension to 9,000 TCD has become operative in 2006-2007 crushing season. An Alcohol Distillery of French origin was added during 1986 with a production capacity of 50,000 litres/day in 2002. Another facility with an option to provide either 30,000 LPD Industrial of fuel Grade Ethanol was added in 2002. A new Fuel Ethanol plant of 100,000 LPD, based on Molecular Sieve technology has been added in 2005. The Company has a gratifying record of average payout in the last 10 years of 27.5%.
PERFORMANCE SNAPSHOT Compared to FY11, Noon Sugar Mills witnessed an increase of 49 percent in its sales revenue from 3.1 billion to 4.6 billion. The sugar sector improved its efficiency both in terms of quality and quantity in the recovery, crushing and production of sugar.
Notwithstanding, the purchasing prices of sugar cane increased by 20 percent from Rs 125 per 40 kg last year to Rs 150 per 40 kg in FY12, still the prices of sugar remained down all over the year as surplus production and large stocks existed in the country. The USDA (United States Department of Agriculture) announced a sharp plunge of 28 percent in the prices of average sugar as compared to last year's wholesale sugar prices, thus deeply affecting the profitability of many sugar mills.
TCP (Trading Corporation of Pakistan) somehow financed the sugar industry by purchasing sugar through local tenders, but, this sugar was being sold to the utility stores at prices lower than the retail prices, further destroying the delicately balanced market position.
During the period under review, the company decreased its financial cost by 35 percent. This decrease was made by the Company's management by adopting a prudent borrowing policy in order to save the Company from a loss situation.
The Company witnessed a 56 percent increase in its cost of sales. This increase was made due to increase in the Company's fuel and power, chemical and stores consumption and repair and maintenance. The opening stock of sugar also affected the increase in the cost of product. During the year, the Company's gross and operating profit margins observed a decrease, whereas, the net profit margin increased from 1.12 percent last year to 2.30 percent in FY12.
The working of distillery sector was quite acceptable owing to both, a constant demand of ethanol in the international market and a much better availability of molasses for enhanced production of ethanol. Foreseeing, this potential the management paid chief attention to ensure a continuous supply of raw-material and other inputs. An increase of 15 percent in capacity utilisation was achieved despite three days per week interruption in natural gas supply, even during the summer months, which greatly handicapped full utilisation of production potential of the plants.
The liquidity position of Noon Sugar Mills limited remained worrisome. The Company had a continuous negative net working capital. In addition to that, the current ratio also posted a decrease from 0.74 percent in FY11 to 0.72 in FY12.
FUTURE OUTLOOK As compared to last year, it is anticipated that the sugar cane will be higher in the season 2012-13. It is expected by the officials and private estimates that the production of sugar in the country would go beyond 5.5 million tons.
The government of Punjab has also increased the purchasing price of sugar cane from Rs 150 per 40 kg last year to Rs 170 per 40 kg this year during the crushing season, witnessing an increase of 13 percent.
The Distillery outlook remains doubtful, largely due to Brazil's heavy stocks situation and falling currency, making it more appealing for the importers to take advantage of it in the export price. A massive build up of Corn based ethanol production in US and an almost flat curve of fossil oil prices, closely followed by ethanol market, are also other factors contributing to this uncertainty.
However, the expected depletion in Brazilian ethanol stocks during their Holiday Season, falling in their inter-crop period and the impact of EU Duty concession for Pakistani products including ethanol, the market is likely to stabilise. The government has allowed the domestic mills to export 500 million tons of sugar cane without any quota restriction in 2013. On the other hand, the international prices of sugar have decreased and are currently $515/ton, due to excess supply internationally. Pakistani millers are hesitant to export sugar because of these depressing prices. However, if they won't export, there would be an abundant amount of supply in the local market which would bring a severe impact on the prices in the local market.
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NOON SUGAR MILLS LIMITED
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Rs in millions 2012 2011 2010
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PROFITABILITY
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Gross profit margin % 9.11% 13.09% 0.24%
Operating profit margin % 5.41% 8.19% -4.58%
Net profit margin % 2.30% 1.12% -11.64%
ROCE % 11.21% 4.41% -26.56%
ROA % 5.82% 1.52% -13.06%
ROE % 12.94% 4.71% -28.48%
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LIQUIDITY
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D/E ratio times 1.22 2.10 1.18
Current ratio times 0.72 0.74 0.42
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ACTIVITY
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Total assets turnover times 2.53 1.35 1.12
Fixed assets turnover times 3.86 2.67 1.46
LEVERAGE
Financial leverage times 2.22 3.10 2.18
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Source: company accounts
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