Press Release

JCR-VIS Revises Outlook assigned to Ratings of JDW Sugar Mills Limited

Karachi, February 17, 2015: JCR-VIS Credit Rating Company Limited (JCR-VIS) has maintained the entity ratings of JDW Sugar Mills Limited (JDWSML) at ‘A/A-1’ (Single A/A-One). JCR-VIS has also assigned instrument rating of ‘A+’ (Single A Plus) to the outstanding Privately Placed Term Finance Certificates - II (TFC-II). Outlook on the assigned ratings has been revised from ‘Stable’ to ‘Positive’. The previous rating action was announced on October 07, 2013.
The ratings reflect JDWSML’s diversified sources of revenue generation; mainly through sale of crystalline sugar and electricity. The company is the largest sugar mill operating in the country. The combined output of three units of JDWSML along with a wholly owned subsidiary currently contributes around 17% of the country’s total sugar production.
Domestic sugar industry is characterized by price in-elasticity; demand over the long-term is driven by changing consumption patterns and growth in population. 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 on account of carryover stocks. In this regard, in order to support the local industry, the government has allowed export of sugar in FY15.
Pursuing the policy of vertical integration, the two high-pressure cogeneration power plants with a combined capacity of approximately 53 MW have been commissioned in 2014. These plants are now supplying electricity to the national grid under long-term Energy Purchase Agreements with the National Transmission & Despatch Company Limited.
During FY14, JDWSML managed to increase its net sales mainly on account of growth in sale of sugar in the local market, electricity and agriculture produce. However, gross margin declined slightly on account of lower average sucrose recovery. Nevertheless, net profit of the company improved mainly on the back of sale of electricity and value addition of bagasse in the form of power generation. Going forward, the margins are projected to improve on the back of efficiency and full impact of revenue from sale of electricity from FY15 onwards.
The total debt level of the company has increased primarily owing to financing of co-gen power plants, acquisition of sugarcane business of JK Farming Systems Limited and BMR of the existing facilities. However, debt service coverage showcased improvement on the back of better FFO. While magnitude of debt repayment is likely to be high in the short to medium-term, cash coverages are expected to remain adequate assuming healthy project related cash flows.
For further information on this rating announcement, please contact Mr. Javed Callea at 021-35311861-70 (10 lines) or fax to 35311873 or Mr. Maimoon Rasheed at 042-36610681-84.

Jamal Abbas Zaidi
Deputy CEO

Applicable Rating Criteria:

Industrial Corporates (Oct. 2003)
Rating the Issue (Sept 2014)

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 2015 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