Press Release

JCR-VIS Reaffirms Entity Ratings of Century Paper & Board Mills Limited

Karachi, December 15, 2014: JCR-VIS Credit Rating Company Limited (JCR-VIS) has reaffirmed the entity ratings of Century Paper & Board Mills Limited (Century) at ‘A+/A-1’ (Single A Plus/A-One). Outlook on the rating is ‘Stable’. The previous rating action was announced on November 20, 2013.

The ratings assigned to Century take into account the demonstrated Sponsor support during times of financial stress in the past, ability to meet projected debt payments and a well articulated business strategy that is likely to address operational challenges in the medium to long term.

Century is engaged in the manufacturing of paper, board and related products. Market share experienced a decline in FY14 to 15.8%. Gas supply has remained the most critical factor affecting the Company’s production levels. In FY14, Century only received 3MMCF of the assigned quota of 12MMCF per day; currently, there is total curtailment of gas due to the on-set of winter season. Grid load-shedding from WAPDA has also begun at approximately 8 hours per day. The Company has been managing its energy requirements by using a mix of Diesel, Furnace Oil, Coal and supply from WAPDA. This has meant that while production levels had been lower in FY14, fuel & power costs were up substantially, as Century had to utilize more expensive fuels. Higher power costs and other input prices compressed the Company’s margins.

In order to address this issue over the long term, Century has recently executed an agreement for installation of an 18 MW co-generation power plant. The plant, to be completed by the second quarter of FY16, will cater to 60% of Century’s energy needs. Market based debt and hence gearing is projected to increase once the recently negotiated fresh long term lines are fully drawn. The fresh long term financing has two years grace period; it is expected that the power plant will come online within this time frame and subsequently allow the Company to enhance its capacity utilization and generate higher level of internal cash to be able to meet the enhanced debt servicing requirements. In the interim, even under the projected scenario of further compression in gross margins, the Company is expected to be able to meet its debt repayments in a timely manner. Meanwhile, Sponsor support may also be expected if required.

For further information on this rating announcement, please contact Mr. Javed Callea (Ext: 501) or Ms. Sobia Maqbool, CFA (Ext: 604) at 35311861-70 or fax to 35311872-3.

Jamal Abbas Zaidi
Deputy CEO

Applicable Rating Criteria: Entity Ratings (October 2003)

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 2014 VIS Credit Rating Company Limited. All rights reserved. Contents may be used by news media with credit to VIS.

JCR-VIS Credit Rating Company Limited