December 04, 2007	Tuesday	Ziqa'ad 23, 1428

KARACHI, Dec 3: Shareholders have long been accustomed to receive bitter results from sugar companies. But what the mills are dishing out this reporting season is not just bitter — it is rat poison!

Let’s look at some of the financial figures announced on Monday: Chashma Sugar Mills posted loss after tax in the staggering sum of Rs358 million for the year ended September 30, 2007, which was more than tenfold the loss of Rs32 million that the company had suffered the previous year.

The Premier Sugar Mills & Distillery Co. posted loss after tax at Rs65 million for the year, which was 26 per cent higher than loss of Rs51 suffered the previous year. Sakrand Sugar Mills reported huge net loss of Rs122 million for FY07, in place of profit after tax of Rs35 million last year. Ansari Sugar Mills showed loss of Rs79 million for the year under review, which replaced net profit of Rs128 million earned the earlier year. Khairpur Sugar Mills, which had suffered net loss of Rs21 million in 2006, showed the deficit to have climbed three times higher at Rs61 million for the year under review.

To lessen a bit of bitterness in the mouth, the Thal Industries Corporation (Layyah Sugar Mills) was among the rare mills that made profit amounting to Rs14 million, which was slightly higher than Rs10 million last year. But the Frontier Sugar Mills & Distillery came up with net loss at Rs36 million for the FY07, which was nearly three times up from loss of Rs9 million unveiled last year.

The problems of the sugar sector are all too complex. Allegations fly from cane growers to sugar mills and vice versa. “The mills are procuring sugarcane at Rs60 per 40kgs against the official rate of Rs67 per 40kgs,” says one interested party. The sugar issue popped up in the first meeting of the Economic Coordination Committee of the caretaker government. Economic adviser to the Ministry of Finance was quoted to have said that the ECC meeting had decided to increase duty on import of sugar from 15 to 25 per cent and remove 15 per cent duty on sugar export. He said the country had a record sugarcane production of 62 million tons enough to produce 4.3 — 4.5 million tons of sugar. Carryover stocks of 528,000 tons had brought about a surplus. He said after accounting for 4.2 million tons of domestic requirement at the rate of 350,000 tons per month, 0.5-0.7 million tons of sugar would be surplus during the current season.

If the wheels of sugar mills are grinding to produce more sugar, the country requires, what ails the industry? Many sugar mills have habitually reported losses for years on end. Shareholders who are deprived of dividends due to losses are understandably bitter.

“If the business cannot be run except at a loss, why don’t such sponsors shut down the mills; sell assets and distribute proceeds among shareholders?” asks an investor who has lost half of his investment and the remaining is stuck up in a sugar mill, which on its part, is comfortably sitting on the KSE’s ‘defaulters’ counter.