Mehran Sugar Mills Limited (MRNS) Q1 FY2026 Earnings Call Transcript & Summary

[Foreign Language] On behalf of Mehran Sugar Mills Limited, I welcome all of you to the [indiscernible] proper briefing session of the company. I'm [indiscernible] Chief Accountant of the company. With me on video link is our CEO, Ahmed Ebrahim Hasham. First we will go through first the -- first, we will present the slides. Then in the second part of the session, we will have a question and answer session. I think you are all aware that Mehran Sugar Mills is the oldest sugar mill in the Pakistan. These are the -- our mill is located at Allahyar, we are the Board of Directors including two of independent directors, [indiscernible] Mr. Hasan Aziz Bilgrami as per SECP requirement and one senior director. Our auditor is Grant Thornton Anjum Rahman as they're a bit -- one of the big four audit firms of the Pakistan. Now you saw the sugar industry review for season of 2024, '25. Pakistan's sugar output in 2024, '25 was 5.86 million metric tons. Domestic demand for sugar in Pakistan is generally estimated in the range of 6.5 to 6.7 metric tons, implying a gap in production demand. Government imported around 281,000 metric tons sugar to fill the above gap in demand and supply. Important events of '24, '25. In this year, [Foreign Language] Mehran was able to receive a standing subsidy, export subsidy totaling to PKR 297 million, which was pending since 2018 from Sindh government. Then in this year, we installed third FFE at the cost of PKR 185 million, PKR 186 million and is successfully running with satisfactory results meaning improved bagasse savings. The gold standard to being super energy efficient would require total of 5 FFE's and thus a further two would eventually be required along with allied structure. The results of these -- installation of these FFE's you will come to know in our results of half year results [Foreign Language] Investment in sugarcane development program reached to PKR 200 million. We restarted a sugarcane development program, including the loaning of inputs and seeds to growth back in 3 years ago, now we have reached PKR 200 million. It was the first year where instead of internal cash flow, we did a collaboration with Fayzal Bank Limited for these payments. Another equity investment led to a realize/unrealized gain of PKR 1.4 billion in this financial results. Corporate sales of sugar reached to 67%, which is -- in 2024, '25, which was record high. We continue to aim for a situation where a 100% sales can be to premium corporate client.

These are financial operating highlights of '24 and '25. Crushing declined -- sucrose decline by -- from 10.79% to 10.22% production declined from 97,000 metric tons to 72,000 metric tons and molasses declined from 40,000 metric tons to 33,000 metric tons. These all declines are in line with the overall decline in whole national level. These are the financial highlights. Our sales improved from PKR 10 billion to PKR 13.5 billion -- PKR 10.9 billion, almost PKR 11 billion to PKR 13.5 billion. This improved -- this increase is due to carryover stocks of '23, '24 and slight increase of sugar sales price. Gross profit -- obviously, gross profit also increased due to reduction in cane prices and improved sales prices -- sugar sales prices. Finance costs decreased by almost 2/3 and from PKR 1.253 billion to INR 442 million. Likewise, profit before tax and profit after tax improved more than PKR 2 billion. And eventually, earnings per share also increased from loss to PKR 29.02. Shareholder equity improved from PKR 2.7 billion to PKR 4.7 billion, PKR 2 billion increase in shareholders' equity. Book value per share increased from PKR 37 per share to PKR 63.63. These are balance sheet -- this is a statement of profit and loss account, as I earlier said, because of carryover stocks and 10% increase in sugar sales price, our turnover increased from PKR 10.9 billion to PKR 13.5 billion. Cost of sales and gross profit margin increased because of reduction in cane cost. Financial, as I earlier said, the other income is PKR 1.832 billion in which PKR 1.4 billion is mainly from equity investments.

[Foreign Language] since the last few minutes. [ Anwar ] can you speak again loudly please. [Foreign Language] can everyone else hear, other people, I just want to confirm, is it just an issue from the Mehran Sugar office as it [Foreign Language] overall Zoom [Foreign Language]

[Foreign Language] your voice is totally clear. I don't think we have -- we can hear the group's office -- the group's voice.

[Foreign Language] okay. So [ Anwar ] can you hear me or can you hear [ Sulaiman ] speak.

I think they should disconnect and reconnect again. That's...

Yes, let me -- okay, let me just tell to [Foreign Language]

In the meantime, to save time [Foreign Language]

[Foreign Language]

[Foreign Language]

[ Kamran ] [Foreign Language] it is a good thing...

Can I just request [Foreign Language] can we just request whoever speaks, if you can please put your video on so and introduce yourself [Foreign Language] please, thank you.

[Foreign Language] due to some reasons [Foreign Language] I'm just an investor.

Okay [Foreign Language] you're an investor. Okay. [Foreign Language] do you have any Mehran shares.

[Foreign Language] a lot of them.

Excellent. [Foreign Language] what's your question.

[Foreign Language]

[ Kamran ] [Foreign Language] consistently Mehran Sugar dividends [Foreign Language] we're reviewing what to do with the capital, which we have. [Foreign Language] while the dividend for the year was not much, I think what this profitability of last year has done is it, we'll ensure whether the business remains cyclical or not we shall [Foreign Language] plan to continue to give a quarterly dividend policies going ahead. [Foreign Language] we were seeing whether we would require an equity injection in our associated company Unicol Limited because [Foreign Language] because acquisition was of a decent size [Foreign Language] and we would like to reduce debt [Foreign Language] so that's answer your question.

[Foreign Language].

[Foreign Language] we had a very good year, but our challenge going ahead is how to ensure consistent profitability. And to be fair, we can't guarantee those kind of numbers. But [Foreign Language] we look for consistency. But we can't I think that was probably a one-off year. We hope we can have years like those ahead, but I don't think we can commit or guarantee anything like that.

[Foreign Language]

Deregulation [Foreign Language] with 50% [Foreign Language] deregulation [Foreign Language] There's a flip side. I don't think there's a clear answer financially, whether it means it will be a plus, plus or not. But I think for companies who are progressive, for companies who are focused more on how to run their core business, and who understand the trade better, international flows better, we see it as overall plus for us. For an industry, I think it will be a net -- it will depend company to company.

[Foreign Language]

[Foreign Language] can we hear you now?

Can you hear me.

[Foreign Language] So do we want to finish the presentation, and then we can do the Q&A. Because [ Anwar ] is back on, yes?

Yes, sure.

Yes. Thank you.

Operational highlights of the capital. Crushing decline from 902 metric tons to 710 metric tons. This is in line with the decline in national production -- national crushing. Sucrose recovery declined from 10.79% to 10.22%, likewise...

Relevant slide [Foreign Language] first slide here, that is appearing here.

Can you see this slide?

We can see slide #1.

[Foreign Language]

[Foreign Language]

[Foreign Language] So these are operational highlights. Our crushing declined, our sucrose recovery from 10.79% to 10.22%, sugar production declined 97,000 to 72,000. Likewise molasses production declined from 40,000 to 33,000. This is all in line with the reduction in net-net production. These are the financial highlights. Our sales improved to 23%. This is because of carryover stock of last season. And slight increase in the sales price, gross profit also increased, gross profit margin also increased. Gross profit increased because of increase in volumes. As I said, we had carryover stocks of last season and slight increase on -- 10% increase in sugar sales price. Finance costs drastically reduced from PKR 1.2 billion to PKR 442 million, almost we came to 1/3 of the last year finance cost. This is because of efficient cash management and reduction of interest rate from 32% to 13%. Likewise profit before tax, profit after tax increased in line with the increase in gross profit. Earnings per share and shareholder equity from PKR 2.7 billion to PKR 4.7 billion, almost 2 billion increase in shareholder equity. Book value also increased from PKR 37 to PKR 63 per share. This is a balance sheet. You see the bottom line of assets from PKR 7.8 billion to PKR 7.408. Short-term investment from PKR 6.27 billion to 2.4 billion. As I said, we have PKR 1.4 billion income from equity side. This is current liabilities and non-current liabilities, long-term finance is almost PKR 240 million, PKR 240 million is all above -- all concessional financing, there is no long-term financing or normal rate or [indiscernible] rate, this is PKR 240 million is the [indiscernible] financing. This is profit and loss of '24, '25. As you know, as I earlier said, because of carryover stock and slight increase in selling prices, our sales improved from PKR 10.9 billion to PKR 13.5 billion, gross profit also increased due to -- because of reduction in grain prices, gross profit -- our margin increased and ultimately gross profit increases. Other income is PKR 1.832 billion out of which PKR 1.4 billion is from equity investments, share of loss/profit from Unicol Limited from loss to PKR 652 million -- loss of PKR 652 million, it is PKR 115 million [Foreign Language] and finance cost as we discussed earlier, PKR 1.2 billion to PKR 442 million. This is financial highlights in graphic. Turnover, you know, as you see turnover is gradually growing year-by-year. These are profitability indicators, operating performance indicators, our ratios, gross profit margin from 8% to 14%, operating profit margin from 11% to 22%, net profit margin loss to 16%, shareholder equity also increased from loss to 45.6%. Return on capital employed 15% to 55%. Return on total assets [Foreign Language] inventory turnover ratio also improved. Inventory turnover in days improved. Debtors turnover ratio improved. Debt to equity ratio is [Foreign Language] 1.81 to 0.55. Interest cover ratio also improved from 0.46 to 7.22% -- 7.22. These are financial highlights of quarter -- first quarter. Because we started crushes a little bit late and there were no carryover serves, therefore, sales numbers comparatively low from 2024. But gross profit margin is in debt -- almost in debt, almost same as last year -- last first quarter. Finance cost drastically reduced, PKR 96 million to 23 million. Dividend payouts. The company declared a final cash dividend of PKR 3 per share for the year ended September 30, 2025. This is an addition to the interim dividend already paid 25%, that is PKR 2.5 per share. During the first quarter also ended December 31, 2025, the company also declared an interim cash dividend of PKR 1.50 per share, reflecting continued financial strength and positive outlook. A total of PKR 412 million was distributed to shareholders as dividend in financial year '24, '25, directly contributing to shareholder wealth contribution. Future outlook. Our prime objective is increase long-term per-share value through operational efficiency, prudent leverage, disciplined capital allocation, and consistent shareholder returns. Operational focus. Early season indicators suggest a 1% to 1.2% improvement in sucrose recovery. We are aiming for our to date recovery to end to our previous highest and be one of the best in the country. By the way [Foreign Language] the challenge is that cane competition has kept those prices extremely high as well. Obviously, completion we have sugarcane purchasing, wherever [indiscernible] sugarcane rates is very high. [Foreign Language] a larger national crop is expected in 2025, '26, between 6.9 to 7.2 million metric tons, which was 5.86 million metric tons last year, this year whereas we are expecting 6.9 to 7.2 millions tons of production. Because of this, sugar prices may remain volatile or unstable because our -- second reason is international prices are -- oversupplied -- also oversupplied and prices are low internationally. Recent 2 to 3 years back, we acquired sugar unit, Unicol, which is progressing constructively. Consistent ethanol exports and export refinancing schemes improve earning visibility. Expected foreign exchange inflows should allow substantial debt drawdowns overtime this financial year. Lower leverage strengthens resilience. Dividend policy. Our intention is to remain consistent dividend payer. [Foreign Language] subject to the liquidity and prudent financial management. [Foreign Language] Capital allocation discipline. Reinvest only where returns are attractive and measurable. [Foreign Language] Reduce leverage where risk-adjusted returns justify it. [Foreign Language] Evaluate new opportunities selectively. [Foreign Language] Avoid growth that increases size but not per-share value. [Foreign Language] Reinvest only where returns are attractive and measurable. [Foreign Language] We are open to question and answer.

Zulqarnain here from Saudi Arabia. I'm a current investor of Mehran Sugar Mill. Sir, [Foreign Language] couple of questions [Foreign Language]. Please bear with me. [Foreign Language] presentation [Foreign Language] third FFE [Foreign Language] installation [Foreign Language] payback [Foreign Language] if you compare with the debt retiring. [Foreign Language] debt retiring [Foreign Language], you are focusing on strengthening the balance sheet or [Foreign Language] remaining 2 FFE's [Foreign Language] plan [Foreign Language] What is the plan? And how do you see the payback of those?

I think [Foreign Language] till we don't have an IRR of at least 35%. We don't now invest in any capital nature projects. So we keep a margin of safety on that also, 30% to 35%. But [Foreign Language] this third FFE has surprised us also, [Foreign Language] I think [Foreign Language] investment [Foreign Language] I think the bagasse saving on that should cross 10,000 tonnes, which will give an IRR of 35% to 40%.

Okay. [Foreign Language] unit cost [Foreign Language] quantify [Foreign Language] what is it contributing to the savings?

I don't get the question. Can you explain the question properly?

Yes. Can you quantify the unit cost saving from the new FFE, and confirm whether the full deployment would place Mehran among the industry's lowest cost producers?

No, [Foreign Language] one FFE cannot determine cost of production. One FFE is a very small element in a plant, which today replacement value of [Foreign Language] PKR 10 billion, PKR 15 billion. [Foreign Language] million [Foreign Language] FFE is a small number. So we have to just see [Foreign Language] when we incrementally put any investment in our factory, it needs to give a specific return. And that needs to easily beat not just the rate of debt but also our cost of capital, which we usually hold at about 6% to 7% over the debt level. So that's how we see it [Foreign Language]. It's not just about putting one FFE, which will make you the lowest cost producer in the country. The lowest cost producer in the country [Foreign Language] first basis is having a large quantum of sugarcane in an area with high sucrose recoveries. And even that may low competition for cane. This year, we have one of the highest recoveries but we have a very high cost of cane. So those are the major elements. And the energy efficiency is one of many areas to become lowest cost, but it is still a small process in the overall larger buys.

Okay. Sir, sugar deregulation [Foreign Language] presentation [Foreign Language] mentioned [Foreign Language] previous -- I saw some previous presentations. So what is the current status of deregulation? Or [Foreign Language] bottlenecks expect [Foreign Language] going forward? When do you see this...

[Foreign Language] industry [Foreign Language] regulation [Foreign Language] industry [Foreign Language] sugar itself -- I mean there's no need for it, but it's remained a political commodity. [Foreign Language] we welcome this decision of the government to deregulate. Having said that, deregulation [Foreign Language] deregulation, we first still don't know what is deregulation in terms of what the government is thinking. So [Foreign Language] deregulation [Foreign Language] globally [Foreign Language] free market, [Foreign Language] everything is totally open, which means, [Foreign Language] sugarcane prices [Foreign Language] after 60 years support price mechanism [Foreign Language] with pressure from international financial institutions. And that's not been a bad experiment because we, as an industry felt [Foreign Language] support prices [Foreign Language] cane crop [Foreign Language]. Without the support price [Foreign Language], this year, Pakistan will produce one of its largest sugarcane crops. [Foreign Language] clear [Foreign Language] the farmer now has confidence in the miller and in competition and not just in requiring a support price. So [Foreign Language], deregulation [Foreign Language] so I think 40% deregulation [Foreign Language]. Major deregulation will, of course, happen once you open up the supply chain for sugar. It's a bit more difficult, but I think the government is trying with efforts to do it. [Foreign Language] mills [Foreign Language] unutilized capacity [Foreign Language] by importing raw sugar [Foreign Language] energy efficiency [Foreign Language] mills with energy efficiency will be able to process raw sugar more cheaply. [Foreign Language] captive market [Foreign Language] like Afghanistan and the other Stans et cetera. [Foreign Language] And in China, we have because China is now a net importer. So those benefits may derive -- would help for companies [Foreign Language] trade flow [Foreign Language] manage [Foreign Language]. The downside is [Foreign Language] competition, [Foreign Language] mills [Foreign Language] locations [Foreign Language] downside [Foreign Language]. So there are -- it's a bit of a -- it's a bit here in there [Foreign Language]. But as I said, 40% is done, 60% is to be done. When it gets done, the remaining 60%, we cannot answer that question. It could -- we are hoping it gets done in the next year or 2. It could happen as soon as 3 months. I don't know it could happen this budget, but we don't have an answer to that.

[Foreign Language] explaination [Foreign Language] 40%, which is done, [Foreign Language] basically sugarcane [Foreign Language] prices [Foreign Language] elevate [Foreign Language].

Sorry, [Foreign Language] elevate [Foreign Language] in is not the right thing to say, also hold there. [Foreign Language] elevate [Foreign Language] government [Foreign Language] minimum support price [Foreign Language] Even in a regulated cane environment [Foreign Language] support price, let's say, government [Foreign Language]. So only the bottom layer of protection is gone. That's the only change which has happened.

Okay. My last question, [Foreign Language] energy efficiency [Foreign Language]. That can play an important role going forward? So other than FFE, Mehran Sugar Mill initiatives [Foreign Language] in terms of solar, other energy efficiency initiatives.

I think the Mehran sugar is one of the first pioneers of solar. We first put up solar when solar was a very new phenomena about, I think, 9, 10 years ago. And we continue to add solar for, I think, in 4 separate stages [Foreign Language] incremental benefit [Foreign Language] because [Foreign Language] power from our own turbines, our own boilers. So [Foreign Language] factory [Foreign Language] steam loads [Foreign Language] in sugar mills. I would say that we [Foreign Language] main judgment and the gold standard is to see, how steam percentage efficient the sugar mill is. [Foreign Language] Pakistan 60 steam efficient [Foreign Language]. [Foreign Language] gold standard, [Foreign Language] I would say, 30 to 40. Mehran is that now at [Foreign Language] at about 41, 42. I think we have achieved 80% to 90% of all the works required to hit the gold standard. But as I said, [Foreign Language] the more closer you get the gold standard, the lower the return on capital becomes means you have to spend more and more money to get small incremental gains. And [Foreign Language] balance sheet [Foreign Language] remaining a cyclical business. The first thing we need to ensure is to manage our cash flows. We don't want to be a business which overinvest and doesn't get any returns. And the other area is [Foreign Language] our major focus while on energy [Foreign Language] but our major, major focus right now at Mehran sugar is how to develop sugarcane with our farmer. So we are really effectively trying to work as much as possible on that because we feel a business [Foreign Language] main concern is how to solve issues and problems. And our main issue in the sugar business is not how efficient we are, not what kind of capacities we have. But how is our farmer planting cane and what are the yields which he is achieving. And [Foreign Language]. Global standards [Foreign Language] we're quite low. And there, we are working with our farmers, we are financing them with different types of fertilizers, pesticide, seeds, farming mechanisms and techniques. And I think that is the basic reason, which allows one sugar mill to stand out from the other. And it's the necessity of the country as well because agriculture land Pakistan [Foreign Language] so yield [Foreign Language] because population continues to grow. So that's where it lies.

Okay. The [Foreign Language] remaining 2 FFE's [Foreign Language] time line defined [Foreign Language] next 2 years, 3 years, 4 years? As you said, they're going forward, the cost -- you need to put into more capital to become more efficient.

[Foreign Language] turf [Foreign Language] 3%. [Foreign Language] cash flows are very easy and -- there were no problems. [Foreign Language] It's on the cards, you already have a 5-year plan of what we want to do, how we allocate the capital depends on every scenario year-to-year. So [Foreign Language] government [Foreign Language] scheme [Foreign Language] we'll keep -- because it is a renewable project. It allows endogenous sustainable energy to be produced. So we'll see what happens over there. [Foreign Language] our investment in Unicol also has been very important. We feel we'll have a good return on that because [Foreign Language] plant [Foreign Language] in Sargodha. So that could be an interesting element also. So let's see. We know what we need to do and where we need to -- how we need to get there, whether it is the right timing to continue to invest in that capital or not, we'll have to judge year-on-year.

[Foreign Language].

[Foreign Language] I think the annual report was excellent. I think you guys really like hit the nail in terms of not only was it -- was it -- was everything understandable, but you explained the industry, and I haven't seen any major sugar company actually having that kind of reporting. So all kudos to, Ahmed bhai you, and your team for doing that. Secondly, coming to the questions, which I have, sir. [Foreign Language] presentation [Foreign Language] operating margin [Foreign Language] gross margin [Foreign Language]. How is your operating margin higher when your gross margin is lower historical levels [Foreign Language]? I mean what is the [Foreign Language] one-off [Foreign Language].

I think the one-offs were the subsidy which we were spending from the Sindh government. Anwar you said PKR 300 million and [Foreign Language].

PKR 297 million was the...

PKR 297 million.

[Foreign Language] $1.4 million [Foreign Language] operating profit [Foreign Language].

[Foreign Language] Sorry, [Foreign Language] operating profit...

[indiscernible].

So PKR 297 million is this. But again, it's such a -- I mean, we were very happy to receive the subsidy. But to be fair, the subsidy was a clean cut subsidy, which the government was supposed to give us because we have sold sugar at a discounted price and had made money on the export. Now interestingly, this was $3 million. This subsidy was supposed to be at a rate of 100 to the dollar. And it's really funny when we got it. We got the same rupees back at PKR 297 million, but technically, they should have been PKR 900 million. So these things get lost in translation or whatever, but it's -- you take these huge haircuts wherever government receivables or et cetera are involved, and we have to -- but yes, so that was booked this year. We had to book it as a profit, of course. And the other one, as Anwar explained, was the equity book. [Foreign Language].

[Foreign Language] operating profit [Foreign Language] actually, it should signify the core operating performance of the company and not the return on the equity investment side. [Foreign Language].

[Foreign Language] after seeing what happened this year because [Foreign Language] expect [Foreign Language] portfolio [Foreign Language] short term [Foreign Language] but technically [Foreign Language] long term [Foreign Language] actually, as per accounting standard, we could not change it, but now we are whatever new fresh buyings we are doing on the market. We are putting that in our long-term portfolio. And because of that, only the dividend income or if you do a capital sale will appear on a P&L and otherwise, it won't. And I think that would probably now be better for our balance sheet because. It will allow less swings. It will show a clear operating result. And I think the balance sheet now has more shock observers built into it because [Foreign Language] we carry no CIBOR debt anymore. And our ethanol investment -- Unicol investment is looking better as well because the more consolidated and sustainable business now with ethanol, CO2 and sugar. So we're going to take this on the long-term book and then only our dividends will show up here. So I think that volatility will go away.

Sir, basically, [Foreign Language] equity -- stock market [Foreign Language] you have a 15% tax -- effective tax rate on that, right? And super tax, be it [Foreign Language] Is that correct?

Yes, correct.

[Foreign Language] Ahmed bhai, basically coming to Unicol, what I was seeing was [Foreign Language] significant [Foreign Language] benefit [Foreign Language] export side, [Foreign Language] 1%, 1.5% [Foreign Language] turnover tax, [Foreign Language] then it made a lot of sense to actually keep this asset private rather than have it listed, right? And now with the expansion which you have done, where you've bought a sugar mill effectively popular sugar mill [Foreign Language]. Now scale has gone up. Obviously, the capital -- capital requirements of the company have also gone up. And now there is no clear arbitrage in terms of no subsidized government financing, et cetera. So does it not make sense now to look at listing this company and then helping it raise its own financing and achieve its own value rather than the 3 groups now potentially also not being able to, what you say, monetize their investment as well.

I think this topic, Salman, I think you've raised it a few times before as well. And we've continuously stuck to the view that we don't see much value in listing. [Foreign Language] wherever we list, we'll have to sell our own equity, right? And we don't see -- we see charm in holding on to that equity. We don't see a reason to divest at all from that equity. Unicol is [Foreign Language] grown to become a professional setup. It's become an interesting unit because it's got 4 sugar mills to supply at molasses. So it's got guaranteed feedstock, which also allows it to have guaranteed CO2 production. We've got a factory in Punjab in a location, which has a lot of sugarcane, which has a lot of potential to develop. And the deleveraging has started also well this year on the balance sheet. [Foreign Language] subsidized financing government [Foreign Language] in the last month or 2, [Foreign Language] CIBOR rates [Foreign Language] export refinance rates [Foreign Language]. So that and then currency [Foreign Language] you can play it both ways, right? So this year, we have taken a call, [Foreign Language] there's no devaluation. So most of our borrowing has been on EFS, at 3.5%, 4% in ERF. So Unicol's finance cost, which really, really hit the balance sheet 3 years ago, was PKR 3 billion for the year. Last year was PKR 2 billion, and we are expecting this year to be PKR 1 billion. So we're saving PKR 2 billion a year now on finance costs from this year onwards with a business which has better dynamics. So we don't see a reason to be fair to list at all till we don't scale it to another level. And [Foreign Language] the next year, 1.5 years, will be deleveraging.

So what about this thing blending of -- blending -- what about reaching these blending targets where you have the element of trying to blend ethanol and then make it make it make it into petro, right? Can Unicol do that? Or do you need a policy, et cetera? Because effectively, exports are still difficult, the ethanol exports, right?

The ethanol exports are no problem at all. We are exporting 100% of what we produce. We are -- we already have a few ethanol facility also. We can blend and sell to the government whenever they want to. We have already asked them to not mandate a policy, but create a policy which allows flexibility of exports and local sales as well where they can do a tender. And if they have a higher price, they can buy or if the export market prefers it, the export market can take it. So we are okay with that as well. We have no issues with that. We are compatible. The beauty of Unicol is that it's got 3 very strong dimensions in it. It's got a high CO2 capacity. It has one of the first companies which would have a high pressure in methane boiler, so very low energy cost on that. And it has the anhydrous facility, which has allowed us a fuel and higher margins on the fuel since quite a few years. So I think those things, along with consistency of feedstock from now 3 in our 4 sugar mills makes it a sustainable margin business basically. So that's where it remains.

Any other questions, so we can conclude here.

Kamran, [Foreign Language].

I think, Kamran, that's a very good question. And I don't want to answer it with a yes or no, but I think it's a very good question. And I think it's something we should look at. [Foreign Language].And this is what we are trying to avoid. [Foreign Language]. So this is a major objective to try and achieve this. [Foreign Language] buyback is a very good idea. I understand valuations are where they are. We have spoken about it once in a Board meeting but there was this thinking [Foreign Language] capital should be used for more constructive purposes rather than buying back shares. But I think it's still a good idea and we will, I think, continue to now discuss it because the balance sheet has more strength in it. So we'll take it up in the next few Board meetings and let's see what happens [Foreign Language].

[Foreign Language].

[Foreign Language]. But fundamentally position change [Foreign Language] buyback [Foreign Language] beauty [Foreign Language] you actually create value for the shareholder who continues to keep the shares of the company because [Foreign Language] percentages [Foreign Language] And he's -- so I think that's definitely a better policy. So [Foreign Language], we'll definitely consider the buyback first. Stick split [Foreign Language].

[Foreign Language].

[Foreign Language]. But we had a decent number. We had not talk of the stock split But [Foreign Language] we will start looking at it. But as I said [Foreign Language] so the first objective will be consistency of dividends, consistency of earnings and cash flow and how we can maintain that. The second will probably be, if we do consider anything would be then a buyback option and then it would be a stock split in terms of rating.

Sir, time is over. Scheduled time is up.

[Foreign Language] Shamir Malik.

So first of all [Foreign Language] thought process is very refreshing, and I think very few companies actually think like the way you do so [Foreign Language] and listen to your thoughts. 2 questions here. One is very generic [Foreign Language] procurement cost [Foreign Language] sugar cane [Foreign Language] as of December [Foreign Language] idea [Foreign Language]. And secondly, [Foreign Language] your target is to strengthen your balance sheet. Could you give a target of how much -- where do you want to see it? Is current levels already going forward you want to strengthen it even further?

In terms of cane costs, Shamir, basically, we are -- I think, by December, we were probably at about PKR 450, PKR 460, I think we're going to close the year near PKR 500 in terms of cane cost for this year. It's higher than last year, which is a concerning bit. The good bit is that while the cane costs might be higher by 10% from last year, I'm giving rough numbers, I think the recovery last year, if I'm not -- was 10.4 something -- Anwar 10.4 [Foreign Language]

10.22.

So this year, [Foreign Language], we are already at 11.3 and it's looking even slightly, it's increasing a little bit more as well. So the recovery has increased by 10%, [Foreign Language] cane cost [Foreign Language] recovery compensate [Foreign Language] and we will -- we are hoping to close this year with one of the highest recoveries in Pakistan. But the problem is [Foreign Language] cane competition [Foreign Language]. [Foreign Language] regarding the capital and where we see it. I mean that's an infinite number, right? I don't want to come up with the number, the more it compounds, the better. But [Foreign Language] our one element will be we would like to retain our equity book, which has now grown to PKR 2 billion, PKR 2.5 billion or sometimes the range is from PKR 2 billion to PKR 3 billion. And we like that to compound slowly. And we'd like to also remain debt free on our balance sheet, and we'd like to use our operating profitability to pay dividends. So if you have a very good operational year, we will continue our dividend policy consistency and use the remaining cash flow to look at capital projects on the factory. And we want to compound our investment book and remain debt-free and then eventually see what to do with that. [Foreign Language]. I don't want to make any forecast, but you will see in the next few quarters, [Foreign Language] Unicol's balance sheet and profit numbers are looking good [Foreign Language] reflect [Foreign Language]. So [Foreign Language] sustainable business [Foreign Language] and if you ask me [Foreign Language] I think once we draw down debt at Unicol in 2, 3 years, maybe even 2 years, I think it could probably look for another acquisition over there to grow that balance sheet even further. But we need to draw down debt quite a bit over before we go that direction. [Foreign Language] we have a good problem. We have no debt. We've got capital sitting on the balance sheet. We will see what to do. But let's see. Let's see because [Foreign Language] last year was the first year where we've now got the capital. We're seeing how business goes this year. And hopefully, in the next few quarters, [Foreign Language] let's hope we have a better plan of what to do. [Foreign Language] Thank you, everyone.

We close our session. Thank you all of you for coming, for joining us. Thank you very much.

Thank you. [Foreign Language].