Press Release

VIS Reaffirms Ratings of Al-Noor Sugar Mills Ltd

February 27, 2019: VIS Credit Rating Company Limited (VIS) has reaffirmed the entity ratings of Al Noor Sugar Mills Limited (ASML) at ‘A-/A-2’ (A Minus/ A-Two). Outlook on the assigned ratings is ‘Stable’. The previous rating action was announced on November 30, 2017.

Reaffirmation of ratings incorporate projected improvement in financial profile due to enhanced profitability from the Medium-density fibreboard (MDFB) segment and turnaround in the sugar segment on the back of improved recovery ratio and increase in sugar prices. Projected improvement in cash flows and inflows from subsidy receivable on sugar exports are projected to be utilized for repayment of outstanding debt translating into improvement in leverage indicators. Achievement of the same is considered important from a ratings perspective.

Ratings are constrained by high business risk given weak sugar sector dynamics and corresponding weakening in financial profile. The Company has been incurring losses for the last two years while decline in equity base along with higher borrowings has resulted in elevated leverage indicators. However, projected cash flows are expected to remain sufficient to meet outstanding long-term debt. Ratings remain dependent on reducing leverage indicators vis-a-vis current levels and maintaining sound debt servicing ability as projected by the management.

Sugar sector dynamics have witnessed pressure with sizeable increase in ending inventory over the last two years. With significant decline expected in production, local demand supply dynamics are projected to depict some improvement in MY19. However, overall surplus inventories are expected to persist (even after accounting for strategic reserves) given significant ending inventory at end-MY18. Quantum of surplus inventories at end-MY19 will remain dependent on exports undertaken vis-à-vis allowed export quota. Business risk profile is supported by presence in the MDFB segment where increasing capacity utilization and strong brand strength and demand for its products have translated into improving profitability indicators.

For further information on this rating announcement, please contact the undersigned (Ext: 207) at 021-35311861-71 or fax to 021-35311872.

Jamal Abbas Zaidi

Applicable Rating Criteria: Industrial Corporates (May 2016)

Information herein was obtained from sources believed to be accurate and reliable; however, VIS Credit Rating Company Limited (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.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.VIS is not an NRSRO and its credit ratings are not NRSRO credit ratings.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 2019 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .

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