Karachi: JDW Sugar Mills Limited has released its condensed interim financial statements for the half-year ending March 31, 2025, revealing a significant drop in net profits. The company, a key player in Pakistan’s sugar industry, reported a net profit after tax of Rs. 2,541 million, a sharp decline from Rs. 7,887 million in the same period last year. Consequently, earnings per share fell from Rs. 137 to Rs. 44, and the gross profit ratio experienced a substantial decrease from 24% to 11%.
According to the company’s Directors’ Review, several factors contributed to the reduced profitability. Despite a 9% increase in gross turnover, profits were impacted by a crash in sugar prices, attributed to an approximate 1.3 million tons surplus of sugar stocks in the country. Of this surplus, the Federal Government authorized the export of 750,000 tons only close to the beginning of the 2024-25 crushing season, by which time most sugar had been sold at a loss. The export profitability provided some relief, preventing even more significant losses, as initial quarterly results could have been negative without it.
Deharki Sugar Mills (Pvt.) Limited (DSML), JDW’s wholly-owned subsidiary, also reported a decline in profits. DSML’s profit after tax fell to Rs. 112 million from Rs. 563 million in the previous comparative period, primarily due to the same surplus-induced challenges faced by JDW.
According to information available from the Pakistan Stock Exchange (PSX), JDW’s other income also decreased significantly, from Rs. 2,486 million to Rs. 1,746 million, due to a reduction in net fair value gain of the sugarcane crop at harvest. This decrease was partially offset by profits of Rs. 767 million from the placement of surplus funds during this period.
The financial report highlighted several operational challenges, including a 16% increase in administration expenses due to inflation and annual increments. The company also faced an increase of Rs. 163 million in financial charges, primarily due to higher mark-up costs on liabilities, although bank borrowing charges declined thanks to lower policy rates by the State Bank of Pakistan (SBP).
Operationally, the company crushed 6.56 million tons of sugarcane during the 2024-25 season, an 8% decrease from the previous year, resulting in a 9% drop in sugar production. The country’s overall sugar production was 5.8 million tons, below the 6.3 million tons target set by the Federal Government, and a decrease from last year’s 6.8 million tons.
JDW Sugar Mills Limited’s balance sheet has grown to Rs. 114 billion from Rs. 70 billion, with accumulated reserves approximately 47 times the paid-up capital. The company maintains strong relationships with financial institutions and prioritizes timely payments to growers, fostering strong ties with them.
The company’s credit rating was reaffirmed at ‘AA-/A-1’ by VIS Credit Rating Company Limited, indicating good credit quality and stable outlook. The company is also progressing in its construction projects, including the JDW Ethanol plant, which is expected to begin production by May 31, 2025.
Despite the challenging landscape, JDW is optimistic about the remainder of the financial year, anticipating reduced finance costs due to declining discount rates and expecting favorable sugar prices. However, the company will face an adverse impact on profitability as income from exports will now be taxed under the Normal Tax Regime instead of the Final Tax Regime (FTR). As part of strategic financial management, the company has decided against announcing any interim cash dividends, focusing instead on upcoming projects and reducing financial costs.