Lahore: JDW Sugar Mills Limited has released its condensed interim financial statements for the half-year ending March 31, 2025, revealing a notable decrease in net profit after tax, amounting to Rs. 2,541 million, compared to Rs. 7,887 million for the corresponding period last year. The company’s earnings per share have subsequently fallen from Rs. 137 to Rs. 44. Gross profit ratio also experienced a decline from 24% to 11%, with the company attributing the reduced profitability to challenges in the sugar and co-generation divisions.
The decline in net profit comes despite a 9% increase in gross turnover, with the decrease primarily attributed to a significant drop in sugar prices. According to the company, the presence of approximately 1.3 million tons of surplus sugar stocks in the country, with the Federal Government permitting the export of 750,000 tons close to the start of the 2024-25 crushing season, led to considerable losses. The industry was compelled to sell sugar below cost to fulfill working capital requirements. Molasses prices also fell by 25% compared to the previous year.
Administration expenses for JDW Sugar Mills Limited rose by 16% due to general inflation and annual increments. Furthermore, other income decreased significantly from Rs. 2,486 million to Rs. 1,746 million, primarily due to a decrease in net fair value gain of sugarcane crop at harvest. This decrease was partially offset by Rs. 767 million in profits earned on the placement of surplus funds.
Financial charges saw a slight increase of Rs. 163 million, attributed to a substantial rise in the markup cost accrued on the all-time high liability of the Workers’ Profit Participation Fund (WPPF). According to information available from the Pakistan Stock Exchange (PSX), however, there was a reduction in financial charges on bank borrowings due to a continuous decline in policy rates by the State Bank of Pakistan (SBP).
Deharki Sugar Mills (Pvt.) Limited, a wholly-owned subsidiary of JDW, also recorded a decrease in profit after tax to Rs. 112 million from Rs. 563 million in the same period last year, for similar reasons. During the 2024-25 crushing season, JDW's sugarcane crushing was down by 8%, and sugar production declined by 9% due to an 8 basis point decrease in sucrose recovery.
The crushing season commenced on November 21, 2024, for both JDW and DSML units, and the company reported a decrease in sugarcane crushing and sugar production by 21% and 25%, respectively, for DSML. The provincial governments did not notify support prices for sugarcane this season, leaving prices to market forces. The Pakistan Sugar Mills Association has requested the Federal Government to fully deregulate the sugar sector to enable international competitiveness.
JDW Sugar Mills Limited’s balance sheet size increased to Rs. 114 billion from Rs. 70 billion, with accumulated reserves approximately 47 times the paid-up capital. The company maintains a strong relationship with financial institutions and prioritizes timely payments to growers. The company is also investing in solar tubewells to support its growers.
VIS Credit Rating Company Limited reaffirmed JDW’s credit ratings at 'AA-/A-1' on May 16, 2025, indicating good credit quality and adequate protection factors. The company anticipates that the fiscal year 2024-25 will be favorable due to reduced finance costs and expected steady sugar prices. However, income from exports will now be taxed under the Normal Tax Regime, potentially impacting profitability.
Despite heavy financial commitments, the company will not announce an interim cash dividend. Construction of JDW Ethanol is nearing completion, with commercial production expected by May 31, 2025, and ongoing projects like the office building in Lahore progressing as planned. The SBP’s reduction in the base rate to 11% is expected to further decrease JDW’s financial costs.