ISLAMABAD: Despite a huge increase in its sale and crushing of sugarcane in 2021, Dewan Sugar mill, one of the few largest sugar industries in Pakistan, has reported massive financial losses for the second consecutive year, 2021 crushing season. In comparison with Dewan Sugar, JDW Mills (owned by Jahangir Tareen and family) has demonstrated Rs4.7 billion profit in 2021 crushing season.
In 2021, Dewan Sugar Mills has reported 5.958 billion rupees income from net sale of sugar/allied items whereas in 2020 crushing season, the mill had earned 3.824 billion from its overall business.
Meanwhile, in 2021 this mills has shown 795 million rupees net financial losses in comparison with 886 million rupees losses in 2020 crushing season. Operating loss of the mill was 680 million rupees in 2021 crushing year, almost same loss the mill reported in 2020 (Rs 695 million).
In quantity, this mill crushed over 340,759 metric tons of sugarcane in 2021 as against 230 m/tons crushed in 2020. The production of sugar in 2021 was 33,939 m/tons, up from 24,375 m/tons in 2020. Nevertheless, Dewan Sugar Mills has reported 9.97 percent average recovery from sugarcane last year in comparison with 10.55 percent recovery in 2020 crushing year.
In its annual report for 2021 crushing season, sent to the Pakistan Stock Exchange, Dewan Sugar Mills aid that its substantial loss is apparently owing to underutilization of existing crushing capacity due to non-availability of working capital and pledge facilities. We have no other option but to sell the finished stock during peak crushing season time when the prices were at the lowest level, therefore, in order to maintain continuity of supply of sugar cane & other cost of production. We could not avail the opportunity to take the benefit of increased prices after post crushing off-season as we do not have the stock carrying opportunity
Distillery Operations This Operation was highly affected by Covid-19 as European buyers delayed shipments which increased the fixed cost and inventory carrying cost. The demand went down globally as last year inventories were higher at customer end. The plant produced 26,061 MT of industrial alcohol, as compared to 18,807 MT of industrial alcohol last year. The period under review operating loss of distillery unit was Rs.44.020 million as compared to operating loss of Rs.138.938 million last year. Reduced profitability was owed to raw material cost which was increased as compared to last year. The ethanol prices were increased this year, which resulted in the reduction of operating loss as compared to previous year. However, in order to curtail the losses management is taking various cost cutting measures and getting better prices in European markets. We are hope full that very soon we will come out from this uncertain situation and come back to positive position. Board & Panel Operations Chip Board plant has produced 183,210 sheets approximate 50% more sheets during the period under review as compared to last year 122,895 sheets. However, because of worst economic situation we could not avail better result. Management is focused on producing value added products and “A” quality of sheets to compete in the market. We are confident that in coming future this segment will be in positive. Polypropylene Operations Due to unviable situation this plant is un-operative.
The company is facing financial crunch, because of non-availability of working capital from banks. Consequent to default in repayment of restructured liabilities as per compromise agreement, the lenders filed for execution of consent decrees. The Company filed suits in Honorable High Court of Sindh at Karachi wherein it has been strongly contested that filing of executions is unjust and against the law. Management expects favorable outcome therefrom. The auditors have expressed adverse opinion in their report on going concern assumption, default in repayment of installments of restructured liabilities and related non-provisioning of mark-up as explained in their report. The financial statements have been prepared on going concern assumption as the Company approached its lender for further restructuring of its liabilities which is in process. Company is hopeful that such restructuring will be effective soon and will streamline the funding requirements of the Company which will ultimately help the management to resume the operations with optimum utilization of production capacity. Therefore, the preparation of financial statements using going concern assumption is justified, as explained in note, 1.2 to the financial statements.
FUTURE OUTLOOK OF SUGAR INDUSTRY FOR 2021-2022
This industry plays vital role of Country economy more or less 8 to 9 million people involved in the production of sugar cane which is primary raw material consisting of more than 80% cost for sugar finished stock. Keeping in view of such importance it is utmost duty of Government to patronage this industry for the benefit of country’s economy and living standard of the rural area of the country. It is also responsibility of industries to take necessary steps to enhance the cultivation of cane planted area, high yielding and quality of cane of high sucrose with the help of Government, bringing down the cost of production of white refined sugar. An utmost demand of industry for fixing raw material cost linked with white refined sugar prices which logical and fair for growers and mills owners.
The Sindh Agriculture Department notified sugar cane prices on November 04, 2021 for the season 2021-2022 of Rs.250/- per 40 kg., in addition to payment of quality premium which will actual determined sucrose recovery over and above 8.7% @ 50 paisa per unit. Which was reduced to Rs.227/- per 40 KG as a result of interim order of Sindh High Court.