Press Release

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

Karachi, April 28, 2016: JCR-VIS Credit Rating Company Limited (JCR-VIS) has reaffirmed the entity ratings of Shahmurad Sugar Mills Limited (SSML) at ‘A-/A-2’ (Single A Minus/ A-Two). Outlook on the assigned rating is ‘Stable’. The previous rating action was announced on February 11, 2015.

The assigned ratings take into account diversification in the revenue stream of the company. Business mix of SSML comprises sugar and ethanol divisions. Despite some increase in average price of sugar, net sales of sugar division declined marginally largely on account of lower volume of sugar exported in FY15.

Given lower availability of sugarcane crop during FY15, the quantity of sugarcane crushed during the season declined vis-à-vis the preceding year. Overall capacity utilization also declined in FY15. However, timely crushing of sugarcane resulted in an improved recovery rate. As a result, gross margins of the sugar division improved. However, proceeds of ethanol division stood lower on account of depressed product prices. Moreover, given lower quantity of sugarcane was crushed during the season, volume for internally produced molasses also declined for ethanol production.

Capital structure of the company has witnessed some improvement on account of partial retention of profits. Subsequently, debt leverage and gearing have declined at end-FY15. Despite decline in bottom line, Funds from Operations improved largely on account of lower financial costs paid. Resultantly, coverage ratio also exhibited improvement at end-FY15. Going forward, the performance of the company would primarily be dependent upon dynamics of sugar and ethanol industry. Level of sucrose recovery and direction of sugar and ethanol prices will largely determine the revenue and profitability of SSML. Meanwhile, level of borrowings may continue to vary with seasonal requirements.

For further information on this rating announcement, please contact the undersigned (Ext: 516) at 021-35311861-71 or Mr. Maimoon Rasheed at 042-35723411 or fax to 021-35311872-3.

Mohammed Khalid Ali

Applicable Rating Criteria: Industrial Corporates (October 2003)

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 2016 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