Press Release

JCR-VIS Reaffirms Ratings of Al-Noor Sugar Mills Ltd at A-/A-2

Karachi, December 31, 2014: JCR-VIS Credit Rating Company Limited (JCR-VIS) has reaffirmed the entity ratings of Al Noor Sugar Mills Limited (ASML) at ‘A-/A-2’ (Single A Minus/ A-Two). Outlook on the assigned rating is ‘Stable’. The previous rating action was announced on November 25, 2013.

Sugar is characterized by price in-elasticity; demand over the long term is driven by changing consumption patterns and growth in population. Currently, the industry is under-going a down cycle and prices have remained depressed for an extended time. Despite a decline in forecasted sugar production in 2015 vis-à-vis previous year; prices are expected to remain range bound over the foreseeable horizon mainly due to continuity of surplus availability of sugar.

ASML is operating with two divisions, sugar and Medium Density Fiber Board (MDFB). Moreover, the company sells surplus power generated during the crushing season to Water & Power Development Authority. Prolonged crushing season translated into higher sugar production and improved top line in FY14. However, gross margin for the sugar division declined slightly on account of lower sucrose recovery rate and depressed market prices. The bottom line receives support from the MDFB division; gross margins of the same have improved over time on the back of diversification into value added products, for which capex has been undertaken.

While having trended downwards, short term borrowings remain sizeable at year-end as the company had carry over inventory. Given the long inventory holding period, reduction in borrowing cost in line with market rates is likely to bode well for the company’s bottom line, going forward, in context of depressed sugar prices. Long-term borrowings of the company have increased due to expansion in the MDFB plant. Debt service coverage ratio remains adequate; however, further increase in long term borrowings may not be considered prudent.

For further information on this rating announcement, please contact Mr. Javed Callea (Ext: 501) or Ms. Sobia Maqbool, CFA (Ext: 604) at 021-35311861-70 (10 lines) or fax to 021-35311873.

Jamal Abbas Zaidi
Deputy CEO

Applicable Rating Criteria: Industrial Corporates (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