Sugar sector has many troubles. Oft-repeated is the artificial floor on raw material price and slump in global commodity demand coupled with over-supply in domestic market. And not to mention tarnished reputation of millers due to overhang of political influence allegations from the past.

But the truth is, the market place of goods cannot really be gamed when there are 83 units of all sizes, and retail price is dictated by market forces but raw material cost is not. It is true that the market has high geographical fragmentation, but too little benefit of millers. Specially, when domestic supply exceeds demand by 33 percent and three-fourths of the demand comes from B2B buyers such as large-sized confectionary, beverages, and FMCG manufacturers with very high bargaining power.

Hence, the producers suffer, but not all suffering is created equal. During the marketing year 2016-17, sugar millers posted erratic profitability. While some did well, others managed to produce poor performance of historic proportions. As MY18 has just ended and market anticipates result announcements of listed mills, a recap of performance of millers during the last year.

Logic dictates that if the rules of a commodity marketplace are rigged, product differentiation won’t really help. Thus, Tandlianwala, with sucrose recovery rate lower than national average, managed to post highest margin. Was it the subsidy on exports that helped? Maybe, but Mehran and Habib Sugar mills’ top-line constituted of a similar percentage of exports, yet managed to perform poorly than most peers.

Geography and proximity to port doesn’t help either, considering that most players with below average margins are concentrated in southern Sindh. But that is easily explained away by freight subsidy received on export.

Is it diversification of revenue source? That’s the consensus of the insiders. But a cursory look on performance of randomly selected millers (albeit only listed) suggests that’s not always the case. Tandlianwala with one of the lowest diversifications stands out with the highest industry wide margin. Yet there was no respite for Habib Sugar Mills, which derives half of its revenue from distillery division.

But there is some consistency in geography; by and large, mills concentrated in Punjab performed above average. Whereas, laggards are largely based out of Sindh, two of which are based in Nawabshah. That could be pure coincidence, considering that the data does not account for the performance of non-listed mills which account for more than two-third of the industry. But it is of note that Sindh-based below average performers posted sucrose recovery levels higher than the industry average.

The data posits interesting questions, and surely is missing a piece of puzzle. One hopes that the sugar millers’ association will disclose more details on segment-wise production of private limited companies in the coming periods, so that factors that make some firms more profitable than the others could be teased out.