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Power Revenue Meets Sugar-Price Pressure: Shahtaj Sugar Mills at June 2026

Shahtaj Sugar Mills lifted production, recovery and gross profit, but weak sugar prices, inventory funding and higher finance cost produced a nine-month loss.

Aug 12, 2026

Company Name: Shahtaj Sugar Mills Ltd

Ticker: SHJS

Reporting period: Nine months and third quarter ended June 30, 2026

Reporting basis: Company-only, unaudited condensed interim financial statements; figures are in thousands of Pakistani rupees except per-share and operating data.

Verdict: Shahtaj Sugar Mills produced much more sugar and added a meaningful power-revenue stream, lifting nine-month gross profit despite lower revenue. The improvement did not survive the full income statement. Sugar prices weakened sharply in the June quarter, finance cost more than doubled, inventory absorbed PKR 4.83 billion of cash and short-term borrowing funded the gap. The result therefore shows better physical production and a useful second business segment, but also severe price, working-capital and financing pressure.

The headline result

The official nine-month report shows net revenue of PKR 6.616 billion, down 6.5% from PKR 7.078 billion in the comparable nine months. Cost of revenue fell faster, declining 12.2% to PKR 5.565 billion. Gross profit consequently rose 41.6% to PKR 1.051 billion, and gross margin widened to 15.9% from 10.5%.

Operating profit increased 63.7% to PKR 604.36 million from PKR 369.17 million. That was not enough to protect the bottom line because finance cost rose 132.4% to PKR 641.94 million. After a PKR 21.69 million share of profit from an associate, PKR 75.67 million levy and PKR 1.91 million income tax charge, the company recorded a PKR 93.48 million loss, versus PKR 9.55 million profit a year earlier. Loss per share was PKR 7.78, compared with earnings per share of PKR 0.79.

The economic distinction is important. Manufacturing and power operations produced a larger gross and operating surplus, but financing consumed more than all operating profit. Sustainable improvement now depends on realizing inventory at adequate sugar prices and reducing the short-term debt accumulated to fund it.

Current period versus the comparable period

  • Revenue: PKR 6.616 billion versus PKR 7.078 billion; down 6.5%. Interpretation: electricity and molasses growth did not fully offset lower sugar revenue and the disappearance of prior-period Afghanistan sales. (Official filing)
  • Gross profit: PKR 1.051 billion versus PKR 742.14 million; up 41.6%. Gross margin: 15.9% versus 10.5%. Interpretation: higher sugar output and recovery, plus the power contribution, outweighed the revenue decline. (Official filing)
  • Operating profit: PKR 604.36 million versus PKR 369.17 million; up 63.7%. Interpretation: gross-profit growth exceeded the increase in administration and other operating costs. (Official filing)
  • Finance cost: PKR 641.94 million versus PKR 276.25 million; up 132.4%. Interpretation: working-capital borrowing expanded and power-plant finance costs entered profit or loss after commercial operations began. (Official filing)
  • Profit after tax: PKR 93.48 million loss versus PKR 9.55 million profit. Interpretation: stronger operations were outweighed by financing and statutory charges. (Official filing)
  • June-quarter revenue: PKR 1.902 billion versus PKR 2.122 billion; down 10.3%. Gross profit: PKR 95.46 million versus PKR 306.86 million; down 68.9%. Interpretation: the quarter exposed the effect of lower sugar prices on the inventory sold. (Official filing)
  • June-quarter profit after tax: PKR 295.46 million loss versus PKR 48.88 million profit. Interpretation: thin gross profit, higher administration and PKR 287.08 million finance cost drove the reversal. (Official filing)

More cane, more sugar and better recovery

The 2025-26 crushing season ran from November 15, 2025 to March 11, 2026, lasting 117 days versus 97 days a year earlier. Cane crushed increased 44.0% to 851,690 tonnes. Sugar production rose 57.6% to 84,627 tonnes, while molasses output increased 37.5% to 37,710 tonnes.

Sugar recovery improved to 9.93% from 9.10%. Management attributed the physical improvement to more cane from the mill’s zone and adjoining areas, higher sucrose content and better operating efficiency. Average cane procurement cost nevertheless increased to PKR 442 per 40 kilograms from PKR 423. (Directors’ report)

Recovery is the most valuable operating measure here because it determines how much saleable sugar the mill obtains from each tonne of cane. A 0.83-percentage-point gain, combined with higher throughput, increased production much faster than cane input. That physical gain helped nine-month gross profit, but it could not eliminate exposure to the selling price at which the larger output was eventually monetized.

Revenue mix: sugar weakened while power emerged

Gross sugar revenue fell 19.1% to PKR 5.998 billion from PKR 7.419 billion. Molasses revenue increased 31.9% to PKR 1.163 billion. Electricity revenue reached PKR 712.87 million, compared with only PKR 32.30 million in the prior period, while press-mud revenue was PKR 38.30 million versus PKR 25.85 million. Net revenue is lower than this gross product total because the company deducts commissions, sales tax, federal excise duty and withholding tax.

The geographic mix also changed. Gross revenue was entirely domestic in the current period; the comparable period included PKR 833.98 million from Afghanistan. Electricity included PKR 205.83 million of unbilled energy-purchase-price revenue. (Revenue note)

These movements explain why total revenue can decline while gross profit rises. Lower sugar revenue and no export contribution reduced the topline, but electricity introduced a higher-margin second stream. The segment note reports power-segment gross profit of PKR 449.26 million and profit after tax of PKR 95.29 million. The sugar segment recorded a PKR 188.76 million after-tax loss before inter-segment reconciliation, showing that power was not merely incremental revenue—it prevented a larger company loss.

Why the June quarter reversed

The nine-month average hides a difficult third quarter. Revenue declined 10.3%, but cost of revenue was nearly flat at PKR 1.807 billion. Gross margin collapsed to 5.0% from 14.5%. Administrative expense rose 31.0% to PKR 110.54 million, and profit from operations fell 90.6% to PKR 16.54 million.

Management said a significant decline in sugar prices, particularly during the third quarter, caused the loss. The accounts support that explanation: finished-goods inventory cost released into the quarter was PKR 1.608 billion, while the company’s larger production had raised the amount of stock exposed to market prices. (Directors’ report and cost note)

Finance cost then reached PKR 287.08 million for the quarter, almost 2.9 times the comparable PKR 98.73 million. The quarterly pre-levy and pre-tax loss was PKR 270.53 million. A PKR 22.30 million tax credit softened the result, but profit still swung to a PKR 295.46 million loss. This was operating and financing pressure, not simply a higher tax rate.

Finance cost and the power project

The company’s 32 MW bagasse-based cogeneration plant achieved commercial operation on October 10, 2025 under a 30-year Energy Purchase Agreement with Central Power Purchasing Agency (Guarantee) Limited. Commercial operation converted a project under construction into an operating asset, began depreciation and moved related borrowing costs into the income statement.

The segment note assigns PKR 245.46 million of finance cost to cogeneration and PKR 396.49 million to sugar operations. Power earned PKR 340.74 million before finance cost and PKR 95.29 million after tax; it was profitable, but debt service absorbed much of its operating contribution. The filing also records PKR 69.85 million of liquidated damages paid to CPPA-G for delay in achieving commercial operation. (Segment and expense notes)

The liquidated damages are tied to project commissioning and should be separated from routine operating expense. Power finance cost and depreciation, however, are recurring consequences of the asset base. Future analysis should therefore focus on electricity availability, dispatch, tariff collection, contract-asset growth and the spread between segment operating profit and financing cost.

Inventory consumed cash and borrowing filled the gap

Stock-in-trade rose to PKR 5.752 billion at June 30 from PKR 926.22 million at September 30, a 521% increase. The cash-flow statement records a PKR 4.826 billion inventory outflow. Trade debts and contract assets together increased by another PKR 316.55 million. Higher payables and contract liabilities recovered PKR 786.48 million, but cash used in operations still reached PKR 3.655 billion before tax, levy and finance payments.

After PKR 173.20 million of tax and levy, PKR 454.02 million of finance cost and other small items, net operating cash outflow was PKR 4.282 billion, compared with PKR 415.24 million a year earlier. Net investment outflow was PKR 149.36 million. (Official cash-flow statement)

Financing supplied the offset. Net short-term borrowing inflow was PKR 4.451 billion, taking the balance-sheet short-term borrowing to PKR 5.837 billion from PKR 1.387 billion. Accrued mark-up increased to PKR 422.06 million from PKR 235.25 million. Cash and bank balances ended at only PKR 27.62 million.

This is the main balance-sheet risk. The company has funded unsold seasonal production with short-tenor debt. If sugar inventory converts to cash at adequate prices, borrowings can unwind. If selling prices remain weak or stock sells slowly, finance cost can continue to absorb operating profit. The income statement and cash-flow statement should therefore be read together.

Balance sheet, associate and dividend

Total assets expanded 62.7% to PKR 13.654 billion from PKR 8.393 billion at September 2025, almost entirely because of inventory and working-capital balances. Current liabilities rose to PKR 7.674 billion from PKR 2.238 billion, while equity declined 3.2% to PKR 3.235 billion after the period loss and a PKR 1.25-per-share final dividend for FY2025.

The company recognized PKR 21.69 million as its share of profit from an associate, up from PKR 6.29 million, and received PKR 6.33 million in cash dividends from the associate. This contribution was helpful but small beside finance cost. The official results announcement reported no new cash dividend, bonus issue, right issue or other entitlement for the June 2026 quarter. (Official results announcement)

AlphaGen model readings

The following four readings are AlphaGen model outputs, not company-reported financial figures:

  • Alpha QoQ Score: 7.84.
  • TTM Performance Score: 41.08.
  • 3Y Business Perf Score: 37.57.
  • Sector Leadership Score: 16.7664.

They are analytical indicators and should be considered alongside the official statements. They are not investment advice.

Recurring versus non-recurring drivers

Sugar recovery, cane cost, sugar prices, production volume, inventory timing, administrative overhead and seasonal borrowing are recurring drivers. Electricity revenue, plant depreciation and power finance cost are also now part of the recurring model following commercial operation.

The PKR 69.85 million liquidated-damages charge is linked to delayed project commissioning and is not a normal measure of recurring plant economics. The initial movement of power-plant borrowing costs into profit or loss is an accounting transition at commercial operation, but the underlying interest burden persists. The larger associate contribution helped the period without changing the core sugar-and-power economics.

Risks and what to monitor next

  • Sugar realization: compare selling prices with the carrying cost of the PKR 5.752 billion stock balance and watch for margin recovery after the weak June quarter.
  • Inventory conversion: the speed at which stock becomes cash will determine whether short-term borrowing and accrued mark-up decline.
  • Finance burden: track interest cost against operating profit; nine-month finance cost already exceeded operating profit.
  • Power economics: monitor electricity revenue, contract assets, collections, operating availability and the segment’s profit after finance cost.
  • Cane and recovery: production gains are valuable only if cane procurement cost and sugar recovery preserve an adequate spread.
  • Policy exposure: support-price decisions, taxes, export permissions and sugar-market intervention can alter cane cost, sales timing and realization.

The clearest test in the next disclosure is whether better factory output and the new power segment translate into cash. A fall in inventory and short-term debt alongside recovered quarterly gross margin would improve result quality. Continued inventory growth or weak sugar prices would keep the financing cycle dominant.

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