Al-Noor Sugar Mills Limited (ALNRS) was incorporated in Pakistan on August 08, 1969 as a public limited company under the Companies Act, 1913. The company is listed on Pakistan Stock Exchange. The principal activities of the company include manufacturing of white sugar, medium density fiber (MDF) board, power generation and its sale. The registered office of the company is situated in the provincial capital Karachi whereas manufacturing facilities are located at Shahpur Jahania, District Shaheed Benazir Bhutto Abad (Nawabshah).
Timeline of the group
Al-Noor group first began trading activities in the late nineteenth century in Mauritius. In 1897, sugar manufacturing facilities on a very small scale were opened in Mauritius and thereafter offices in India, Sri Lanka and Burma were established to handle trading of sugar, rice and jute.
After the partition of the sub-continent the group established Noori Trading Corporation (Pvt) Limited in Karachi to handle trading of general merchandise. In 1960 Noori Sugar Factory was established with a cane research farm in Moro/Nawabshah District, and with a small sugar-manufacturing unit. This unit late came to be renamed as Al-Noor Sugar Mills Limited.
In 1980, Shahmurad Sugar Mills Limited was commissioned and listed on the then Karachi Stock Exchange. Four years later the group established Reliance Insurance Company Limited.
In 1987 the Al-Noor Medium Density Fiber (MDF) Board Industries (known as Lasani), was established as a unit of Al-Noor Sugar. The unit has since expanded in MDF laminates and continues to expand in various furniture and décor products. In 1991 the Al-Noor Modaraba Management Company was established and subsequently Al-Noor Modaraba was floated on the then Karachi Stock Exchange. In 1996 export of rice was started under the brand name of "Shalamar". The group established a distillery under the auspices of Shahmurad Sugar Mills Limited in 2004.
Pattern of shareholding
As per details disclosed in financials, the sponsor family owns significant (more than 5 percent share) through associated undertakings and direct ownership by individuals; however, the cumulative total of substantial shareholdings by related parties and directors barely touches 40 percent.
Combined minority share held by entities such as PSEs, banks, DFIs, insurance companies, mutual funds, and NIT funds among others adds an additional 14.3 percent. Remaining share is held by undisclosed individuals closing in at nearly 46 percent of total shares outstanding.
Single largest shareholding is held by Samia Zakaria, a member of the sponsor family not holding any executive or directorial position.
Business activities
Al-Noor Sugar is one of the largest manufacturers of white sugar in Sindh province; however, the company is most noted to be one of the pioneer sugar millers to have diversified its business revenue streams by adding the flagship fiberboard "Lasani" to its portfolio very early on, which contributes one-third of top line on average. In addition, associated undertaking Shahmurad has one of the largest distillery operations in the province.
Primary business analysis
The crushing of sugarcane commenced on November 18, 2016 and continued for following four months. During the period the mill crushed 1.11 million tons of sugarcane, recording a decline of 16 percent in crushing volume over the previous year. The company attributes lower crushing to poor crop performance in Sindh, coupled with stagnant prices of final product on the back of carryover stock from last year. Recall that the province had recorded a bumper crop during MY17, which led to highest ever crushing volumes; however, as the outgoing government refused to lower support price of sugarcane or offer subsidy on export, the sector recorded a buildup of inventory which led to depressed production during MY18. On sector-wide basis, total sugar output declined by 6 percent over the previous year clocking in at 6.58Mn tons, whereas the company recorded 13.3 percent decline, with total sugar production at 110,810 tons.
Given election year, provincial government refused to change sugarcane support price for the crushing period 2017-18. This resulted in millers refusing to procure raw material from growers well into January 2018. As a result of intervention by High Court, support price was set at Rs160 per forty kg based on an interim order only applicable in Sindh. However, given the interim nature of court order, the company recording cost of goods consumed at government notified rate only.
Had the company used the Rs160 per 40kg rate in its cost of goods, gross loss recorded would have been lower by Rs554 million.
During MY18, federal and provincial governments announced substantial freight support subsidies, which allowed the industry to get excess inventory off the market. Al-Noor was one of the major beneficiaries of federal subsidy, receiving over Rs1,148 million from federal government at Rs10.3 per kg of exports. Similarly, the firm received Rs186 million worth subsidy from Sindh government at the rate of Rs9.3 per kg.
Financial analysis
The company has recorded an operational loss due two reasons in MY18, which if adjusted for would show a healthy financial performance. First, freight support received from the government has been shown as other income, due to the irregular nature of this revenue stream. Second, sugarcane consumed has been recorded at a higher price, as final price is subject to a Supreme Court decision. If adjusted the two amounts, the company would have recorded a gross profit of Rs1.2 billion, or 13.3 percent.
Bottom line received further support through share of profit in associates from investments made in Shahmurad, group company with ethanol distillery operations.
Outlook
The crushing season has begun with a delay of two months, in first week of December 2018. As notified support price in Sindh and Punjab have remained unchanged at Rs182 and Rs180 per 40 kg respectively, crop size is expected to be 25 percent lower than last year.
So far, the federal government has not announced any subsidy on export quota of 1.1 million tons, due to which export during 1QMY19 remained very low at just 70,614 tons. However, some respite in export is expected if Sindh government decides to allow subsidy, just as Punjab government. As per news reports, proposals to this extent are currently under consideration.
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AL-NOOR SUGAR MILLS LIMITED
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Rs (mn) MY18 MY17 YoY
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Sales 9,081 6,897 32%
Cost of Sales (9,733) (6,191) 57%
Gross Profit (653) 706 -192%
Administrative expenses (509) (449)
Distribution Costs (198) (66) 200%
Other operating expenses (19) (10)
Profit from operations (1,378) 181 -862%
Other income 1,351 19 6874%
Share of profit in associates 94 1 11272%
Finance cost (310) (328)
Profit before tax (243) (127) 92%
Taxation 123 97
Net profit for the period (121) (30) 299%
EPS (Rs) 8.23 26.37
GP margin -7.19% 10.24% -17.4pp
Operating margin -15.18% 2.62% -17.8pp
PBT margin -2.68% -1.84% -0.84pp
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Source: Company accounts
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Pattern of Shareholding (as at September 30, 2018)
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Categories of Shareholders %
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Associated Undertakings & Related Parties
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First Al-Noor Modaraba 0.5%
Zain Trading Corporation Pvt. Limited 3.6%
Noor Trading Corporation Pvt. Limited 9.2%
Samia Zakaria 5.4%
Directors & their dependants 20.4%
Public Sector Corporations 2.8%
Banks, DFIs, NBFIs, Insurance Co., Pension Funds 0.3%
NBP, NIT & ICP 1.3%
Mutual Funds-CDC Trustee NIT 9.3%
Joint Stock Companies 0.7%
Individuals 45.8%
Others 0.8%
Total 100.0%
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Source: Company accounts
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