Press Release

JCR-VIS Reaffirms TFC Ratings of Al-Noor Sugar Mills Ltd. at A-.
 

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March 17, 2006: JCR-VIS Credit Rating Company Ltd. (JCR-VIS) has reaffirmed the A- (Single A Minus) ratings assigned to the two tranches of privately-issued TFCs of Al-Noor Sugar Mills Ltd. (ASML) while removing these ratings from ‘Rating Watch’. The outlook on both ratings is now ‘Stable’.

The ‘Rating Watch’ status was assigned by JCR-VIS to all sugar mills rated by it following the dispute between the growers and mill owners leading to a disruption in production activities in several sugar mills across the country. The status was then extended while JCR-VIS assessed the potential impact of various options being considered by the government to control the situation. JCR-VIS now believes that the chances of aggressive government intervention in the current season at least have receded, particularly as the global record high in sugar prices mean that large-scale imports would not help in substantially reducing the price level in the local market.

The ratings of ASML have been reaffirmed as despite the shortfall in cane production over the last two crushing seasons (i.e. in FY2005 and FY2006) the company has posted significantly improved cash flows. In FY2005, the improvement was mainly based on the significant increase in sales of the Medium Density Fiber Board (MDFB) division as part of the management’s strategic initiative to minimize volatility in profitability arising from the highly cyclical nature of the sugar industry. This has been achieved through a combination of BMR activity in the MDFB division as well as shifting completely to the use of wood pulp in place of bagasse as a raw material, therefore de-linking MDFB production from the availability of cane from season to season.

JCR-VIS is expecting financial results of ASML for FY2006 to improve even further, as already reflected by the healthy 1Q FY2006 accounts, as the company will benefit from the record price levels of sugar in the market along with steady growth in MDFB. Also, the further debt requirements of ASML are not very high at present since no major capital expenditure is envisaged at the moment, although the existing mismatch is an area which needs management’s attention. In addition, JCR-VIS understands that the management is exploring various options for increasing diversification of its product base and would follow developments in this regard with interest.

For further information on this rating announcement, please contact Mr. Safdar Kazi (Safdar@jcrvis.com.pk / Ext: 221) or Mr. Saad Ahmed Madani (saad@jcrvis.com.pk / Ext: 219) at 5671822/5671833/5680996 or fax to 5681105/5671600.




Safdar Kazi
Member Rating Committee & Coordinator International Affiliates

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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 2006 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