Press Release

VIS assigns Initial Ratings to Etihad Sugar Mills Limited

Karachi, January 10, 2020: VIS Credit Rating Company Limited (VIS) has assigned initial entity ratings of ‘A-/A-2’ (Single A Minus/A-Two) to Etihad Sugar Mills Limited (ESML). The medium to long-term rating of ‘A-’ denotes good credit quality with adequate protection factors. Moreover, risk factors may vary with possible changes in economy. The short-term rating of ‘A-2’ denotes good certainty of timely payments coupled with sound liquidity and fundamental protection factors. Outlook on the assigned rating is ‘Stable’.

The ratings assigned to ESML take into account moderate business risk profile of the company, largely underpinned by ample experience of sponsors led management in the sugar sector and sizeable crushing operations. The ratings derive comfort from considerable improvement in net sales, profit margins and cash flows during the outgoing year, mainly on account of notable increase in sucrose recovery rate and higher sugar prices in the domestic and international markets. The ratings incorporate notable growth in FFO generation, mainly on the back of higher profits during the period under review, which resulted in slight improvement in coverages. In addition, the ratings reflect improvement in leverage indicators during the period on the back of augmentation of equity base. The aforementioned indicators are still on the higher side, though management has plans for further improvement, going forward. The ratings are constrained on account of cyclicality inherent in the sugar sector impacting the overall business risk profile of the company from time to time. Further, ratings will remain dependent upon sustenance of margins and profitability indicators coupled with maintenance of leverage indicators at lower than current levels, going forward.

For further information on this rating announcement, please contact Ms. Maham Qasim (042-35723411-13, Ext. 8005) and/or the undersigned at 021-35311861-66 (Ext. 201) or email at .

Javed Callea

Applicable rating criterion: Corporates (May 2019)

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 2020 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .

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