In SY24, FRSM reported a net loss of PKR 1.53 billion (LPS: PKR 61.30), compared to the previous year’s net profit of PKR 1.22 billion (EPS: PKR 48.79). Management reported that sugar prices remained depressed throughout the year due to the imposition of FED and an increase in WHT.
Similarly, ethanol prices and demand in international markets remained subdued, keeping molasses prices under pressure. In SY24, USC withheld PKR 529 million in payments and halted further lifting of goods worth PKR 579 million, causing liquidity constraints and higher finance costs.
However, most payments were later received, except for bid money. The company has also recovered a major portion of overdue payments from USC, amounting to over PKR 400 million. The company is in the process of installing an additional 600 KW of solar power, complementing the existing 248.5 KW, bringing the total capacity to 848.5 KW for self-consumption to meet off-season energy needs.
To improve working capital, FSML issued 58% right shares at PKR 35 per share, raising PKR 507 million in SY24. Additionally, FSML received an export freight subsidy of PKR 304.73 million in January 2025 for sugar exports made seven years ago.
As of February 15, 2025, actual sugar production stood at 4.795 MT, approximately 10-12% lower than the previous year. Management expects total production to reach 6-6.1 MT by the end of the season. With last year’s demand at 6.4 MT and a carryover stock of 400,000 tons, the supply-demand balance is expected to remain stable, with no shortages anticipated. FRSM produced 51,439.15 tons of refined sugar by crushing 543,241.36 tons of cane, achieving an average recovery of 9.707% up to the first fortnight of February 2025.
The SY25 season began with sugarcane prices at PKR 400 per maund, which have since risen above PKR 650. Given the lower yield and recovery trends, sugar prices are expected to increase by PKR 15-20 per kg. Molasses prices have increased this season, but this impact is expected to be offset by lower molasses production. Punjab contributes 64-66% of total sugar production, Sindh 30-32%, and KPK 5-6%.
The current price of bagasse is PKR 9,000-10,000 per ton. Management expects the sugar segment to perform better than the distillery unit. Overall ethanol production is expected to be lower due to limited molasses availability. The minimum support price for sugarcane was reported at PKR 425 per maund in SY24.
A higher policy rate significantly impacted the cost of sugar production. Sindh produced 2.2 MT of refined sugar, a 29% increase from the 1.7 MT produced in the previous season.
Due to a carryover stock of 1.1 MT at the start of SY24 and industry production of 6.8 MT, the total sugar supply reached 7.9 MT, exceeding the country’s total domestic consumption. Consequently, the government allowed the export of only 750,000 tons, with Sindh’s quota set at 225,000 tons.
Additionally, long-outstanding government subsidies amounting to PKR 388 million further increased financial costs. Going forward, the management anticipates that the fullfledged operation of VKT & FFE will save a significant quantity of bagasse, whose selling price has nearly doubled since last season, thereby boosting revenue. Following these operations, the bagasse sales ratio has improved to 6% from 2%. Management expects sugarcane production to increase by 10% year-over-year.
Important Disclosures
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