Press Release

JCR-VIS Reaffirms Entity and TFC Ratings of JDW Sugar Mills Limited

Karachi, September 05, 2012: JCR-VIS Credit Rating Company Limited (JCR-VIS) has reaffirmed the medium to long-term entity rating of JDW Sugar Mills Limited (JDWSML) at ‘A’ (Single A) and short-term entity rating at ‘A-1’ (A-One). The rating of the company’s TFC issue of Rs. 1.7b has also been reaffirmed at ‘A+’ (Single A Plus). Outlook on the assigned ratings is ‘Stable’.

The ratings take into account JDWSML’s prominent position in the sugar sector of the country as evident by the largest market share in sugar production. JDWSML comprises three sugar mills in addition to which, during 2011, the company has setup another mill in the Ghotki district. The new mill is currently classified as a subsidiary and will be eventually amalgamated into JDWSML as unit four. Strategic portfolio of the company comprises investments in wood pulp, dairy and power sectors. The balance sheet of JDWSML has been leveraged to provide working capital support to subsidiary and associates. Some of these companies have yet to achieve profitable operations and it may take some time before earning stream may develop from the same.

Sugarcane crushed by JDWSML during the 2011-12 crushing season was higher as compared to the last crushing season, however due to a lower sucrose recovery rate; sugar production did not increase with the same magnitude. Sale of sugar is moderately supported by sale of molasses and bagasse whereas the company also sells electricity during the crushing season. Higher volumetric sales led the growth in net sales revenue however gross margins declined owing to suppressed sugar prices on account of surplus sugar production. Going forward the company plans to enhance its power generation capacity by investing in plant and machinery.

The debt levels of the company alleviated during FY11 and further during 9MFY12. Gradual sale of inventory and realization of trade debts will facilitate the company in repaying short term debt. There is some maturity miss-match evident on company’s balance sheet. The company has planned additional CAPEX for enhancing power generation capacity of unit II & III. The planned CAPEX is to be met through syndicated long-term loan facility. Even after accounting for the CAPEX requirements, the management has projected capital structure and liquidity to ease in the coming years. JCR-VIS will continue to track progress against projections.

For further information on this rating announcement, please contact Ms. Sobia Maqbool (Ext: 510) at 021-35311861 70(10 lines) or fax to 35311873 or Mr. Maimoon Rasheed at 042-36610681-84.
Jamal Abbas Zaidi
Deputy 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 2012 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