Declining exports by sugar milling sector in the ongoing fiscal year has raised the spectre of a severe downturn in the industry. After all, exports last year were highest in recent memory. Whereas, as per 10MFY19 export figures reported by PBS, sweetener exports have fallen short by two-thirds in dollar terms compared to same period last year.
Does that mean the sector is in for a serious shock in financial performance for MY19? Not necessarily. Out of 83 operational milling units in MY18 (total installed units – 91), 55 units belonging to 40 distinct groups contributed to fulfill the exports quota of two million tons announced by federal government during the previous year. While on absolute basis, single largest beneficiary of subsidy (single company) was JDW due to its sheer size. Although share of exports in its total output/sales for the year was marginal, at barely one-fifth of total sales. In contrast, 24 milling units, belonging to 11 distinct groups, showed substantial dependence on exports in terms of total off take during the year.
These groups include represent a variety of sponsor families, with Omni group of Sindh owning highest number of exporting units – nine. Most export-centric units after all did belong to Sindh province – 17 out of 24 – as the provincial government announced subsidy of Rs9.7 per kilo, in addition to what had already been announced by federal government – Rs10.3 per kg.
In contrast, the group with largest export dependence in percentage terms (of top-line) belonged to Punjab. Hunza group, a private limited concern which has two units in the largest province, exported 112 percent of its output for the year, denoting that the units even offloaded inventory from last year to avail export subsidy.
Sponsor group which availed the highest benefit on cumulative volume basis for its four distinct companies turned out to be Late Makhdum Ruknuddin’s family, father of incumbent federal minister of planning.
It is of note that that of the 11 sponsor groups, only six units – all belonging to Sindh province – are listed entities, namely, Al-Noor and Shahmurad; Mehran; Faran (Amin Bawany); Al-Abbas (Ghani Usman); and Mirpurkhas (Ghulam Farooque). While financial performance of these listed groups is set to take a hit on account of poor exports in MY19, the sector by and large is expected to remain insulated owing to persistent domestic demand.
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