Press Release

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

Karachi, October 07, 2013: JCR-VIS Credit Rating Company Limited (JCR-VIS) has reaffirmed the entity ratings of JDW Sugar Mills Limited (JDWSML) at ‘A/A-1’ (Single A/A-One). 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’.

Ratings take into account the sizeable market share enjoyed by the company in the sugar sector; the combined output of three units of JDWSML along with a wholly owned subsidiary currently contributes around 12% of the country’s total sugar production.

Sugar commodity is characterized by in-elastic demand; currently, the industry is under-going a down cycle and prices have remained depressed for an extended time. Despite increase in quota allowed by the government to export sugar; prices are expected to remain range bound over the foreseeable horizon mainly on account of surplus production forecasted in the upcoming crushing season, both locally and globally.

Gross margins of the company witnessed improvement during 9M13 on account of considerable improvement in sucrose recovery rate. Overall profitability of the company also benefited from reduction in financial charges. In line with this, cash generated from operations has depicted growth translating into improved debt servicing capacity.

Overall debt levels of the company increased on a timeline basis partly due to enhanced utilization of short-term credit lines to finance working capital needs. Over the years, balance sheet of JDWSML has also been leveraged to provide funds to related parties including subsidiary and associates. There remains asset liability maturity mismatch on the company’s balance sheet. The management, cognizant of the same, intends to address the said issue in due course of time.

The company holds strategic investments in wood pulp and dairy sector. Operational restructuring has improved earning capacity of dairy business while further investment in the wood pulp business has been put on hold for the time being. The management is now setting up co-generation power plants, based on high pressure boilers that will generate electricity through steam turbine, using bagasse as fuel. The project is expected to start operations by middle of upcoming crushing season. While the project is being financed through debt to equity ratio of 80:20, cash coverages are likely to remain adequate assuming healthy project related cash flows.

For further information on this rating announcement, please contact Ms. Sobia Maqbool, CFA (Ext: 510) at 021-35311861-70(10 lines) or fax to 35311873 or Mr. Maimoon Rasheed at 042-36610681-84 (4 lines).

Javed Callea

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 2013 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