Company Name: Habib Sugar Mills Ltd
Ticker: HABSM
Reporting period: Nine months and quarter ended June 30, 2026
Reporting basis: Unaudited standalone condensed interim financial statements. The company’s financial year ends September 30, and the filing reports amounts in Pakistani rupees, principally in thousands; this analysis converts major figures into millions or billions for readability. [Official nine-month report]
Verdict
Habib Sugar Mills produced a stronger nine-month profit despite a near-20% fall in revenue. Better sugar recovery and a lower cost-of-sales burden relative to revenue lifted gross margin, while investment gains and a shift from net finance cost to net finance income also helped. The improvement was real, but it did not convert into cash: sugar and raw-material stocks expanded sharply, operating cash outflow reached PKR 5.55 billion and short-term borrowing rose.
The result is therefore mixed rather than uniformly strong. Core sugar economics improved and quarterly profit grew, but the company finished June carrying PKR 8.87 billion of inventory and remained exposed to sugar policy, product prices and a sizeable investment portfolio. The right question is not only whether profit rose, but how quickly that inventory can be sold without surrendering the recovered margin. [Official nine-month report]
AlphaGen model readings
The following four readings are AlphaGen model outputs, not company-reported financial figures. They should be considered alongside the official accounts and do not constitute investment advice.
- Alpha QoQ Score: 43.26
- TTM Performance Score: 88.89
- 3Y Business Perf Score: 57.08
- Sector Leadership Score: 77.6462
Headline comparison
- Net sales and services: PKR 12.526 billion versus PKR 15.617 billion, down 19.8%. Lower sugar sales and weaker textile revenue more than offset modest growth in the distillery division. [Official nine-month report]
- Gross profit: PKR 2.257 billion versus PKR 2.174 billion, up 3.8%. Gross margin expanded to 18.0% from 13.9%, an improvement of about 4.1 percentage points. [Official nine-month report]
- Operating profit: PKR 2.148 billion versus PKR 1.917 billion, up 12.0%. Higher other income supported the advance after operating expenses. [Official nine-month report]
- Profit before levy and income tax: PKR 2.222 billion versus PKR 1.901 billion, up 16.9%. Net finance income replaced the prior-period net finance cost. [Official nine-month report]
- Net profit: PKR 1.342 billion versus PKR 1.001 billion, up 34.1%. Basic and diluted EPS increased to PKR 9.94 from PKR 7.41. [Official nine-month report]
- June quarter: sales fell 11.9% to PKR 5.322 billion, while net profit rose 25.5% to PKR 418.9 million. Quarterly EPS was PKR 3.10 versus PKR 2.47. [Official nine-month report]
Why revenue fell but gross profit rose
Sugar was the largest source of the sales decline. Nine-month sugar-segment revenue fell to PKR 7.735 billion from PKR 10.862 billion, a reduction of 28.8%. Yet its gross profit rose to PKR 1.659 billion from PKR 1.419 billion, and segment profit before central other income and expenses increased to PKR 1.223 billion from PKR 1.008 billion. Sugar gross margin consequently expanded to roughly 21.4% from 13.1%. [Official nine-month report]
Operations explain part of that improvement. The company crushed 981,838 tonnes of cane over 109 days, compared with 839,005 tonnes over 106 days. Average sucrose recovery improved to 10.86% from 9.92%, and sugar production increased to 106,631 tonnes from 83,198 tonnes. Better recovery means more saleable sugar from each tonne of cane, spreading processing cost over greater output. Management attributes the stronger sugar result to this operating performance. [Directors’ report]
Higher production did not mean higher recognized revenue because a large portion remained unsold at the period end. Finished goods rose to PKR 6.950 billion from PKR 1.462 billion at September 2025, while raw materials increased to PKR 1.605 billion from PKR 442.7 million. This accounting sequence—produce first, sell later—helped create the apparent combination of lower sales, stronger margin and a major inventory build.
Sugar pricing and government policy remain central. Management said the 2025–26 season operated without provincially notified minimum cane support prices and discussed possible wider deregulation. It also reported national surplus production and a request from the industry to permit exports, while noting that authorities had resisted exports over domestic-price concerns. These are management statements about the policy environment, not guarantees of future export permission or pricing. [Directors’ report]
Distillery, ethanol, CO2 and textile performance
Distillery revenue increased 4.6% to PKR 4.500 billion, but gross profit fell 13.8% to PKR 613.6 million and segment profit declined 24.1% to PKR 366.5 million. Ethanol output rose to 21,194 tonnes from 19,234 tonnes, while liquid CO2 production increased to 7,255 tonnes from 7,072 tonnes. Higher volume therefore did not protect profit, implying weaker pricing, product mix or higher conversion and distribution costs; the report does not quantify each cause separately. [Official nine-month report]
The textile division deteriorated more clearly. Revenue fell to PKR 290.3 million from PKR 452.2 million, gross profit became a PKR 15.2 million loss from a PKR 42.7 million profit, and the segment loss reached PKR 56.5 million. Management attributed the reversal to higher production costs and lower sales volume. Textile remained small relative to sugar and distillery, but it diluted the group’s operating improvement. [Official nine-month report]
The trading division was immaterial in the period. Bulk-storage activity, which the company also lists among its operations, contributed no reported storage income in the nine-month segment table compared with PKR 1.8 million in the prior period. Habib Sugar’s operating identity therefore remained dominated by sugar and distillery rather than the smaller textile, trading and terminal activities. [PSX company profile]
Operating expenses and non-core income
Selling and distribution expense eased 2.8% to PKR 345.8 million, but administrative expense rose 18.0% to PKR 378.2 million. Other operating expenses declined to PKR 161.1 million from PKR 181.6 million. Together these movements left operating expenses only modestly higher before other income, allowing the better gross profit to flow through.
Other income rose to PKR 775.4 million from PKR 601.5 million. The current period included PKR 361.4 million of realized gains and PKR 21.5 million of unrealized gains on investments measured through profit or loss. Dividend income fell to PKR 345.6 million from PKR 400.2 million, while the prior period included PKR 100.7 million of sugar freight subsidy that did not recur. Profit growth therefore combined core sugar improvement with material investment income, rather than coming from operations alone. [Official nine-month report]
Net finance income was PKR 74.6 million, compared with PKR 16.2 million of net finance cost. This is notable because borrowings increased; income on treasury accounts and the company’s broader liquidity and investment position outweighed financing charges in the reported line. Readers should not assume that this favorable net position will persist if cash remains tied in inventory or interest rates and investment balances change.
Tax, EPS and comprehensive income
Profit before levy and income tax rose 16.9%, but net profit grew 34.1% because the combined levy and income-tax burden was lower. Levy and income tax absorbed PKR 880.0 million, about 39.6% of pre-levy profit, compared with PKR 900.0 million or 47.3% a year earlier. EPS moved in line with net profit because the share count remained 135 million ordinary shares. [Official nine-month report]
Net profit does not capture the entire investment effect. Long-term equity investments measured through other comprehensive income recorded a PKR 762.6 million unrealized loss, compared with a PKR 2.151 billion gain in the prior period. Total comprehensive income was consequently PKR 579.5 million, far below PKR 3.152 billion a year earlier. The loss reduced reserves and equity but did not pass through the profit-and-loss account. [Official nine-month report]
This distinction is economically important. Realized and fair-value-through-profit investment gains supported reported operating income, while the larger adverse movement on strategic equity holdings sat below net profit in other comprehensive income. A complete assessment must therefore read both statements rather than treating EPS as the only measure of period performance.
Balance sheet and the inventory-funded cash drain
Total assets increased 5.5% from September 2025 to PKR 24.788 billion. Stock-in-trade climbed to PKR 8.869 billion from PKR 2.057 billion, driven mostly by finished sugar and raw materials. This PKR 6.812 billion working-capital absorption was the main reason cash used in operations reached PKR 4.800 billion before finance and tax, and PKR 5.550 billion after those items. [Official nine-month report]
The company funded the build by liquidating investments, drawing borrowing and using cash. Short-term investments fell to PKR 4.262 billion from PKR 7.374 billion, cash and bank balances declined to PKR 1.252 billion from PKR 2.557 billion, and short-term borrowing rose to PKR 1.652 billion from PKR 615.5 million. Cash and cash equivalents net of borrowing ended at negative PKR 399.8 million, versus positive PKR 1.421 billion in the comparable nine-month cash-flow statement. [Official nine-month report]
Contract liabilities increased to PKR 1.629 billion from PKR 1.013 billion, providing some customer-related funding, while trade and other payables declined. Equity slipped to PKR 17.213 billion from PKR 17.443 billion despite profit because the company paid PKR 810 million of the previously declared FY2025 final dividend and recognized the FVOCI loss. That dividend was a prior-year distribution paid during this period, not a new interim payout announced with these results. [Official nine-month report]
Recurring drivers, one-offs and risks
The repeatable positives were higher cane throughput, improved recovery, stronger sugar gross margin and better segment profit. Less repeatable contributors included investment disposals and fair-value gains. The prior-period freight subsidy did not recur, while the current period’s lower effective tax burden amplified net-profit growth. The investment portfolio also created a large comprehensive loss outside EPS.
The largest near-term risk is inventory realization. If sugar can be sold at prices consistent with the recovered margin, the stock build can release cash and repay borrowing. If domestic prices weaken, exports remain restricted or carrying time extends, storage and finance costs can erode the accounting margin and require write-downs. The second risk is portfolio volatility: long-term investments were PKR 5.878 billion and short-term investments PKR 4.262 billion, large enough to move equity and income materially. [Official nine-month report]
Other watchpoints include cane procurement and recovery, ethanol pricing and export demand, textile losses, energy and fuel costs, exchange-rate exposure, related-party financial relationships, counter-guarantees and regulatory changes affecting sugar exports or deregulation. Management also flagged geopolitical disruption to trade and energy markets; that is a risk statement, not a quantified forecast.
What to monitor next
The most important next-quarter test is cash conversion. Track how quickly finished-goods inventory falls, the prices achieved, whether short-term borrowing and accrued markup decline, and whether operating cash flow turns positive. Revenue growth without inventory release would be less reassuring than lower reported sales accompanied by strong cash collection.
Second, separate sugar and distillery margins. Sugar benefited from recovery and production economics, while distillery profit weakened despite higher ethanol output. Third, reconcile net profit with other comprehensive income and realized investment gains. Finally, monitor whether the textile segment returns toward break-even and whether policy decisions permit surplus sugar exports.
The June 2026 results demonstrate that Habib Sugar can improve profit even in a lower-sales period, but the quality of that improvement will only be confirmed when the inventory converts into cash. This analysis explains reported results and risks; it is not a recommendation to buy or sell the company’s shares.
Sources
- Habib Sugar Mills — Unaudited report for the quarter and nine months ended June 30, 2026 [Open official report]
- Pakistan Stock Exchange — Financial results notice dated July 22, 2026 [Open result notice]
- Pakistan Stock Exchange — HABSM company profile and announcement history [Open PSX page]
- Habib Sugar Mills — Official corporate website [Open company site]