Press Release

JCR-VIS Upgrades Ratings of JDW Sugar Mills Limited

Karachi, August 16, 2011: JCR-VIS Credit Rating Company Limited (JCR-VIS) has upgraded the medium to long-term and short-term entity ratings of JDW Sugar Mills Limited (JDW) to ‘A’ (Single A) and ‘A-1’ (A-One), respectively. The rating of the company’s Rs. 1.7b TFC issue has also been upgraded to ‘A+’ (Single A Plus). Outlook on the assigned ratings is ‘Stable’.
With continued expansion over the years, JDW has become the largest operator in the sugar industry. The combined crushing capacity of its three units is 37,000 TCD, representing around 10% market share, which is expected to increase further once its latest expansion comes online. JDW has also benefited from its strategic location in sugarcane cultivation area with one of the highest sucrose recovery rates. This coupled with volume expansion and higher sugar prices, has benefited the company in terms of considerable increase in sales and improved gross margins.
With higher retained earnings, total equity increased significantly. Subsequent to 1H11, the BoD has decided to issue 10% right shares at per share price of Rs. 70 (inclusive per share premium of Rs. 60), which will further strengthen the equity base. Meanwhile, the sponsor’s subordinate debt was converted into equity during FY10. The company’s higher profitability has also resulted in substantial improvement in cash flows, hence debt coverage.
Going forward, the company plans to consolidate in the area of sugar manufacturing. The management’s clearly articulated strategy of building a long-term relationship with growers has paid-off in recent times, with increasing area under cultivation. The company’s investments in related companies, may take a couple of years before beginning to contribute towards the earnings stream. The increasing focus on horizontal integration, especially in the field of power generation primarily from bagasse, is expected to help in sustaining margins. In the long-term, strategic diversified investments are likely to somewhat mitigate risks associated with the sugar sector.
For further information on this rating announcement, please contact Ms. Sabeen Saleem (Ext: 510) at 021-35311861-70 (10 lines) or fax to 35311873 or Mr. Maimoon Rasheed at 042-36610681-84.

Faheem Ahmad
President & CEO

Information herein was obtained from sources believed to be accurate and reliable; however, JCR-VIS Credit Rating Company Limited (JCR-VIS) does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. JCR-VIS, the analysts involved in the rating process and members of its rating committee do not have any conflict of interest relating to the rating(s)/ranking(s) mentioned in this report. JCR-VIS is not an NRSRO and its credit ratings are not NRSRO credit ratings. JCR-VIS is paid a fee for most rating assignments. This rating/ranking is an opinion and is not a recommendation to buy or sell any securities. Copyright 2011 JCR-VIS Credit Rating Company Limited. All rights reserved. Contents may be used by news media with credit to JCR-VIS.

JCR-VIS Credit Rating Company Limited