Unicol Limited (‘Unicol’ or ‘the Company’) is a public unlisted company, incorporated in 2003.

Unicol is part of Ghulam Faruque Group, which was established in 1964. The distillery was setup as a joint venture among three sugar mills, namely, Faran Sugar Mills Ltd., Mehran Sugar Mills Ltd. and Mirpurkhas Sugar Mills Ltd. All the companies in JV agreement are listed on Pakistan Stock Exchange. The location and operational capacities of the three sugar mills is given in the adjacent table. The distillery became operational in 2007. While, food grade Carbon Dioxide (CO2) production began in 2014.

Primary business activity of the Company is to manufacture and sale ethanol and carbon dioxide. The Company has its plant located in Mirpurkhas, whereas, it has its head office located in Beaumont Road, Karachi. The Company produces Anhydrous Ethanol (ENA> ~99.9%), A-Grade Ethanol (ENA > 96% v/v ethanol) and B Grade ethanol (ENA >92% v/v ethanol) with installed production standing at 160MT per day.  Unicol produced 55,568MT of ethanol during MY24 (MY23:57,575MT)  with utilization of 99% (MY23:103%). The Company also produces food-grade LCo2 of 99.9% purity level through sugarcane fermentation, with an installed production capacity of 72MT per day. Unicol produced 11,476MT of LCo2 during MY24 (MY23:11,940MT) , with utilization of 64% (MY23: 66%).

As the Company is a JV among three sugar mills, Faran Sugar, Mehran Sugar and Mirpurkhas Sugar holds equal stake of ~33.3% in Unicol. Almost negligible stake resides with the individuals in the Board of Directors.

Ownership of the Company seems stable. The sponsoring Group, Amin Bawany group, Hasham group and  Ghulam Faruque Group, has strong and diversified standing in various segments of the economy.

Ghulam Farooq Group, Amin Bawany group and Hasham group is ranked amongst the leading industrial groups of the country with diversified interests in cement, FMCG, paper products, sugar and allied, trading, renewable energy and terminal handling. Strong affiliation and technical track record have added to the success of companies within the Groups.

The Company's financial resilience is attributed to the established strength of its sponsoring group, as well as the demonstrated operational efficacy and consequent financial robustness of its joint venture partners, specifically Mehran Sugar Mills, Faran Sugar Mills, and Mirpurkhas Sugar Mills Limited.

Board of Directors comprises 7 members including the Chairman and Chief Executive Officer. There are 5 Non-Executive Directors, 1 Chief Executive and 1 Independent Director on the BoD. The three sponsoring Companies have equal representation on the Company's board.

Mr. Asif Qadir, Chairman of the Board and an independent member, has an overall experience of more than 20 years. He is also on the board of Tripack FilmsLimited. Descon Oxychem Ltd, Liaquat National Hospital & Medical College, Century Paper & Board Mill Limited and Indus Motor Company Ltd.

Mr. Azam Faruque, serving as an executive director of the Company, has an overall experience of more than 20 years. He is also on the board of Cherat Cement Company Limited., Faruque (Pvt) Ltd, Greaves Pakistan (Pvt) Limited, Habib University Foundation and Atlas Honda Ltd.

Mr. Ahmed Ebrahim Hasham, serving as an executive director of the Company, has an overall experience of more than 20 years. He is also on the board of Mehran Sugar Mills Limited, Mehran Energy Limited, Uni Energy Limited, Pakistan Molasses Company (Pvt) Ltd, MCB Islamic Bank Ltd and Hasham (Pvt.) Limited.

Mr. Ahmed Ali Bawany, serving as an executive director of the Company, has an overall experience of more than 20 years. He is also on the board of Faran Sugar Mills Ltd, Reliance Insurance Company, Uni Energy Limited, B.F Modaraba and Uni-Foods. 

Mr. Khurram Kasim, serving as an executive director of the Company, has an overall experience of more than 20 years. He is also on the board of Mehran Sugar Mills Ltd, Pakistan Molasses Company (Pvt) Ltd, Hasham (Pvt.) Limited, Mehran Energy Ltd, Uni Energy Ltd and Mogul Tobacco.

Mr. Omer Amin Bawany, serving as an executive director of the Company, has an overall experience of more than 20 years. He is also on the board of Faran Sugar Mills Ltd, B.F Modaraba, Reliance Insurance Company and World Memon Foundation.

During MY24, six Board meeting were convened among members with meeting minutes being captured formally. Detailed packs are shared before the meetings and are documented. The Company has an Audit Committee in place, which is chaired by Mr. Asif Qadir.

The Company’s external auditors, Grant Thorton, have expressed an unqualified opinion on the financial statements of the Company for the year ended Sept-24.

The Company’s organizational structure reflects clear reporting lines and is split between the production site and head office. The Company operates through seven functions; namely, procurement, operations, sales and marketing, finance, IT, internal audit and HR.

The Company’s management comprises experienced and qualified individuals. Mr. Aslam Faruque, Chief Executive Officer, is a graduate of marketing. He has more than 25 years of experience in the sugar and ethanol industry. Additionally, he is the Chief Executive for Mirpurkhas Sugar Mills Limited. He is supported by Mr. Mustapha Qaisar (COO), Mr. Saad Ali Khawaja (CFO) and Mr. M. Asad Siddiqui (Company Secretary). 

The Company has no management committees in place. However, performance is discussed among management (Mr. Aslam Faruque, Mr. Ahmed Ebrahim Hasham and Mr. Ahmed Bawany) on a weekly basis to review activity.

The Company uses SAP software, managed by the group company Zensoft Pvt. Ltd, for MIS. Reports generated are submitted to senior management on a daily, monthly and quarterly basis.

Oversight and effective management is maintained through the internal audit department at group level. The department monitors various functions and internal controls of the Company, and reports to the Board’s Audit Committee.

IN ethanol industry, the prices were largely driven by the disruption in the global supply of gas and oil resulting from the ongoing conflict between Ukraine and Russia. This disruption had a significant impact on ethanol production, especially in Europe and other major ethanol-producing countries. Consequently, ethanol prices rose from approximately USD 695 per metric ton (Mton) in calendar year 2021 to around USD 936 per Mton during calendar years 2022 and 2023, as reflected in the accompanying graph. However, as supply chains began to normalize in calendar year 2024, with the resumption of gas and oil supplies and the revitalization of the ethanol industry in Europe, the international ethanol prices decreased to approximately USD 784 per Mton due to an oversupply of ethanol in the market. . In MY24, sugar production was recorded by, 6.7million MT, primarily due to the lower procurement of sugarcane resulting from increased cost and reduced recovery rate. To manage the surplus inventory, the Government permitted the export of 0.5 million MT of sugar, offering some relief to the industry. Despite these setbacks, sugar production is estimated to recover slightly to around 7 million MT. The Government’s continued support for exports is expected to provide a much-needed boost to millers, helping them navigate challenging industry dynamics and mitigate financial pressures.

The Company is a leading player in the manufacturing of ethanol. Also the Comany has entered into the sugar segment with the market share of  1%.

The Company mainly sells ethanol and exports to a variety of countries concentrated in Middle East, Africa and Europe. The Company’s major customer, Alcotra SA (58%), is part of Alco Group which is a global network of companies specialized in the production, distribution, and trading of all grades of ethanol. Other major customers include PT. Karsavicta SA (7.6%) and Sasma BV (5%). The topline is also supported through sale of liquid CO2 to local companies. These include Coca Cola Beverages, Pakistan Beverages, National Gases and Bolan Castings Limited. The Company’s topline consists of export (66%) and local sales (34%),showed a growth of 28% during MY24 (MY23: 69%). The main driver of the Company’s revenue is ethanol that consists 65% of the total sales of the Company. Export sales of the Company decreased and stood at PKR 13bln during MY24 (MY23: PKR 14bln) due to decrease in prices of ethanol. Out of total export sales the ethanol covers 97%, the sales of sugar covers 2% and CO2 covers 1%. Out of local sales, sugar covers 82%, molasses covers 12%, bagasse covers 2%, and CO2 covers 4%. Local sales of the Company increased and stood at PKR 6bln during MY24 (MY23: PKR 285mln) due to the addition of sugar segment and sales of molasses and bagasse.

The company's financial performance deteriorated substantially in MY24, evidenced by a dramatic contraction in all key profitability metrics. Gross profit margins sharply declined to 7.3% from 33% in the prior year, reflecting a significant surge in raw material costs. Consequently, operating profit margins also compressed, falling to 4.5% from 28%. Most notably, the company transitioned from a net profit of 18% in MY23 to a net loss of 10% in MY24, primarily attributed to substantial finance costs, indicating a severe erosion of overall financial health.

The Company has acquired the assets of Popular Sugar Mills, integrating vertically. This has added the diversification in the Company's portfolio.

Due to the cyclic nature of the business, raw material (Molasses) for the year has to be procured during the sugar crushing season i.e. from November till March. For this purpose, the Company sources its raw material from its sponsoring companies (Faran Sugar, Mehran Sugar and Mirpurkhas Sugar Mills), along with external sources. The company exhibited a slight enhancement in its working capital management during MY24. Average inventory days saw a marginal improvement, decreasing to 82 days from 85 in MY23, suggesting a slightly more efficient inventory turnover. Trade receivable days remained consistently low, at 2 days in MY24 compared to 1 day in MY23, indicating robust collection efficiency. Gross working capital days improved marginally to 84 days from 86 days in the previous year. Trade payable days lengthened slightly, increasing to 4 days from 3 days in MY23. Consequently, net working capital days decreased to 80 days in MY24 from 83 days in MY23, reflecting a modest optimization of short-term liquidity and operational efficiency.

Unicol's debt coverage metrics experienced a significant decline in MY24, primarily driven by a substantial reduction in free cash flow from operations (FCFO). FCFO decreased sharply to PKR 981 million from PKR 4 billion in MY23, while finance costs remained relatively stable at PKR 1 billion. Consequently, the interest coverage ratio plummeted to 0.3x from 3.6x, and the total coverage ratio fell to 0.2x from 1.9x, indicating a severe deterioration in the company's ability to cover its debt obligations with available cash flows. This sharp decrease highlights a critical weakening of Unicol's financial risk profile.

The Company has a highly leveraged capital structure represented through a debt-to-equity ratio. The Company’s 58% borrowings consists of short term borrowings. The Company’s short-term borrowings comprise of two facilities including Export refinance facility and short term finance facility. Export refinance facility carries mark-up at the rate prescribed by State Bank of Pakistan for Export Refinance Scheme ranging from 14.5% to 19% (2023: 10% to 19%) per annum. The total limit under the facilities is Rs. 4,996 (2023: Rs. 3,961) million. These are secured against joint pari passu charge on the current assets of the Company. Short term financing carries mark-up at the rate from 1,3, 6&9 months' KIBOR + 0.40% to 1, 3, 6& 9 months' KIBOR + 1% per annum and are repayable on expiry. The total limit under the facility is Rs. 14,154 (2023 Rs. 4,350) million. These facilities are secured against joint pari passu charge on the current assets of the Company.