KARACHI: VIS Credit Rating Company Limited has reaffirmed the entity ratings of RYK Mills Limited at single A/A-two. Outlook on the assigned ratings is stable.
Previous rating action was announced on Feb. 19, 2021, said release on Wednesday.
Ratings reaffirmation continues to factor in the extensive sponsors experience, long-standing business relationships with institutional customers and sizeable sugarcane crushing operations along with the presence in power division. Ratings also reflect the improvement in crushing capacity over the past two years on the back of significant capex pertaining to steam efficiency enhancement and reduction of process bottlenecks.
During the period under review, the company fully divested its wholly-owned subsidiary, SW Sugar Mills Limited, with immediate payment settlement. Business risk profile of sugar sector is high given inherent cyclicality in crop levels and raw material prices; however, given the indication of higher crop coverage area demand supply dynamics are expected to depict some improvement in the ongoing year.
The ratings further take note of developments with regards to penalties imposed by CCP on certain sugar mills and legal proceedings for interim relief initiated by the subject company. However, in the meanwhile, uncertainty of the outcome would persist on the sector. The material impact of penalty imposed (amounting to Rs 1.5 billion on RYK will be significant and hence VIS will continue to monitor further development in this matter.
The management has planned to set up a new distillery plant with stated ethanol production capacity of 125,000 liters per day.
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