Press Release

JCR-VIS Assigns Ratings to Deharki Sugar Mills (Pvt.) Limited

Karachi, June 08, 2016: JCR-VIS Credit Rating Company Limited (JCR-VIS) has assigned initial entity ratings of ‘A-/A-2’ (Single A Minus/A-Two) to Deharki Sugar Mills (Private) Limited (DSML). Outlook on the assigned ratings is ‘Stable’.

The ratings assigned to DSML take into account its association with JDW Sugar Mills Limited (JDWSML), the largest sugar manufacturing group in the country. Being a wholly owned subsidiary of JDWSML, the company draws various benefits from its parent including operational integration while JDWSL has also extended advances to DSML to meet working capital requirement. The ratings also draw comfort from the availability of personal guarantees of parent’s directors on borrowings availed by DSML.

DSML operates with an installed capacity of 13,000 tons/day. Production data for the 2015-16 crushing seasons reflect healthy growth in sugar production while recovery rates have also remained stable. Various functions are shared between JDWSML and DSML including information technology, audit and finance. In addition to this, senior management team of JDWSML also manages DSML operations.

Net sales have depicted steady growth in the recent years while margins have remained a function of procurement price of sugarcane and retail sugar prices. Management expects margin to improve during the ongoing year on account of improvement in retail prices. Inline with reduction in benchmark rates and lower average borrowings, finance cost has trended downwards. Management has projected the profitability to grow at 10% per annum over the next five years.

Capital structure of the company witnessed improvement on account of retention of profits translating into decline in debt leverage and gearing indicators. Long term debt represented around 43% of total borrowings while remaining borrowing pertains to working capital requirement with varying outstanding levels during the year. Given current debt levels, cash coverages are expected to remain adequate.

For further information on this rating announcement, please contact the undersigned (Ext: 501) or Mr. Mohammed Khalid Ali (Ext: 508) at 35311861-70 (10 lines) or fax to 35311873.

Javed Callea

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