Karachi: A prominent sugar company has disclosed its financial and operational performance for the half-year ending March 31, 2025, showcasing a blend of resilience and strategic financial management amidst industry-wide challenges. The company reported significant turnover growth while navigating through reduced production volumes and other operational hurdles.
The company's turnover for the period surged by 104%, reaching Rs. 7.98 billion, in contrast to Rs. 3.92 billion in the previous year. This growth was attributed to increased sugar sales volumes, inclusive of carryover stock. However, the gross profit witnessed a contraction of 23.9%, falling to Rs. 717.31 million, impacted by lower sugar prices and reduced sucrose recovery.
Operational data revealed a decrease in crushing volumes by 21.3% to 710,803 metric tons, attributable to reduced sugarcane availability despite an expanded cultivation area. This decline was primarily due to lower per-acre yields caused by a severe heatwave, a phenomenon linked to climate change. Sugar production also dropped by 25.4% to 72,643 metric tons, while molasses production decreased by 18.5% to 33,247 metric tons.
The sucrose recovery rate fell by 0.57% to 10.22%, reflecting the adverse climatic conditions affecting the industry. As a result, sugar production costs rose, further squeezing profit margins. Despite these setbacks, the company reported a profit before tax of Rs. 842.39 million, marking a 7.7% increase from the previous year.
The finance costs decreased significantly by 54% to Rs. 244.88 million, primarily due to declining KIBOR rates and improved working capital management. This reduction contributed to a stable bottom line, with net profit after tax increasing by 5% to Rs. 745.40 million. The company's earnings per share rose by 5% to Rs. 9.95.
According to information available from the Pakistan Stock Exchange (PSX), the company has been able to maintain profitability through cost optimization and strategic financial management, despite the lower gross profit margin of 11% compared to 27% in the previous year. The company's diversified balance sheet was instrumental in sustaining its financial performance.
The sugarcane pricing and supply challenges persisted, with cane prices rising to Rs. 450-480 per 40kg, driven by a drop in yields despite an increase in cultivation area. The absence of a government-mandated support price led to a market-driven pricing mechanism, which encouraged competitive pricing and aggressive procurement by mills.
Looking ahead, the company plans to focus on cost optimization by leveraging lower interest rates and investing in high-quality cane seeds to enhance yields. The company anticipates a recovery in by-product pricing, particularly in ethanol, in the upcoming quarters.
The performance of Unicol Limited, a subsidiary, was noteworthy, with its profit contribution improving to Rs. 15.84 million, up from Rs. 0.47 million the previous year. Unicol's stabilization following the acquisition of a sugar asset and the reduction in borrowing rates has been pivotal for the company's overall positive outlook.
As the industry moves towards deregulation, the company advocates for continued market-driven pricing to ensure sustainable profitability. The gradual reduction of interest rates is expected to further reduce finance costs, supporting the company's strategic focus on maintaining a diversified balance sheet and long-term profitability.
The company's outlook remains cautiously optimistic, with expectations of improved sugar and ethanol selling prices in the coming months, contributing to a sustained positive financial trajectory.