Imperial Ltd. sells his land and packages his sugar business


What’s in a name? A Punjabi sugar factory has tried them all, but nothing seems to have stopped yet.

In May 2007, a candy factory was established by Colony Textile Mills. Colony owned 46.98% of the company in 2009 (the oldest available financial statement), while Colony Textile Mills CEO himself, Fareed Sheikh, owned 20.7% of the plant. While the office was based in Lahore, the two manufacturing plants were located in Tehsil Phalia, Mandi Bahauddin district, and Tehsil Mian Channu, Khanewal district.

Colony Sugar Mills continued to be known as such until May 2015 when it was renamed Imperial Sugar. The factory not only distanced itself from the Colony logo and brand name, but also got a brand new logo: swirling gold letters and a purple and gold crown to accompany the name. (However, he did not distance himself from Colony Textile Mills, which in 2015 still owned 16%, while three of Sheikh’s parents held 28%.)

That name will last for another five years, before moving to Imperial Limited in August 2020. This time the logo is an intricately designed I and L next to each other (no crown in sight). The change is recent enough that the link to Imperial Limited’s website still leads to the previously designed Imperial Sugar website. Imperial Sugar can also always be found in the PSX listings.

The name change last year was a deliberate decision: the latest incarnation of the sugar mill is determined not to exist as a sugar mill at all. In a notice published on the Pakistan Stock Exchange on January 4, 2021, the company said the board discussed to consider and approve the sale of the land, building, factory and machinery in Tehsil Phalia district Mandi Bahauddin (this is subject to shareholder approval at the next annual general meeting). This plant has a sugar refinery capable of refining 7,500 million tonnes per day and an ethanol distillery with a production capacity of 135,000 million tonnes per day.

Except, of course, that the mill hasn’t really made sugar for a while. Profit looked at the company’s finances to try to piece together what happened.

Maybe the signs were still there. In the company’s first financial statements for 2009, the company worryingly noted that despite higher revenues and profits that year, “both sugar and ethanol are expected to be in short supply for 2009. -2010, globally. Producers are asking for much higher prices…. Given the current situation, the company also sources sugar cane at higher prices. This will result in a significant increase in the cost of production. Unless there is a corresponding increase in the selling price of sugar, the profitability of the sugar divisions may be affected. “

And that’s exactly what happened. Between 2008 and 2013, objectively, the revenues of sugar factories increased from 2,107 million rupees to 7,234 million rupees. And yet, net income peaked in 2009 at 309 million rupees, falling to less than 200 million rupees between 2010 and 2012 and reaching 262 million rupees in 2013.

What explains this irregularity? We can look at the gross margins of the company during the same period. In this case, the gross margin in 2008 was 32% – yet in 2013 that figure was 9%. In other words, in 2008 Imperial made Rs 32 gross profit over cost of goods sold, but gained Rs 7 gross profit in 2013. If a company’s ratio goes down (which is the case, in this case), it means the sugar mill sold its inventory for a lower profit, ie. he must pay the farmers more for their sugar cane. This is exactly what Imperial predicted, which would drive up production costs and hurt the business.

In 2014, the company suffered a loss of Rs 126 million for the first time, and gross margins again fell to just 5%. But things only got worse. In 2015, the company recorded a loss of 500 million rupees. The Phalia facility was temporarily closed, while only intermittent crushing was in progress at the Mian Chanu facility, both due to a lack of working capital.

This must have been the last year that the mill produced sugar. In 2016, the two units remained suspended and the company made the decision to divest the properties and assets of the plant. He managed to execute at least half of that decision the following year, selling the Mian Chanu unit for 5,000 million rupees in 2017. The proceeds of this sale were used to repay loans from the National Bank of Pakistan, Bank of Punjab, Habib Metropolitan Bank Limited and BankIslami Pakistan.

But the Phalia unit remains, as there does not appear to have been a deal in the past four years. According to the company, the total current market value of the land, building and factory is Rs 8,765 million. In the meantime, the company has transformed into its current phase: “to carry out an activity of buying, selling, holding or acquiring or investing the capital of the company in all types of financial instruments”. In his recent annual report, he only had one line on potential future projects: setting up a hydroponics project. We wonder what the name of this project could be.


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