Press Release
VIS Reaffirms Entity Ratings of JDW Sugar Mills Limited
Karachi, May 16, 2025: VIS Credit Rating Company Limited (VIS) reaffirms entity ratings of JDW Sugar Mills Limited (‘JDWSML’ or ‘the Company’) at ‘AA-/A1’ (‘Double A Minus/A One). The medium to long-term rating of 'AA-' denotes high credit quality coupled with strong protection factors. Moreover, risk factors may vary slightly with possible changes in the economy. The short-term rating of 'A1' signifies high certainty of timely payment with excellent liquidity and good company fundamentals. Risk factors are minor. Outlook on the assigned rating is ‘Stable’. Previous Rating action was announced on May 13, 2024.
JDWSML, the flagship entity of the JDW Group, is the largest sugar producer in Pakistan and its sponsors and professional management team have significant experience in the Sugar, Co-Gen and Agricultural sector. The Company has longstanding relationships with growers along with focus on research activities in sugarcane development. Currently business risk profile of the Company draws support from diversification of operations into power sector and corporate farming and Construction and erection work at Ethanol division is being done at full swing and expected to achieve commercial production any time during May 2025.
Assigned ratings take into account the business risk profile of Pakistan’s sugar sector, which is shaped by seasonal and cyclical production trends, government intervention, and exposure to price and interest rate fluctuations. Production remains concentrated within a short harvesting window, requiring mills to manage inventory and financing needs throughout the year. Competitive procurement pressures persist due to the clustering of mills and the perishable nature of sugarcane, while the prior application of minimum procurement pricing further impacted cost structures, particularly for smaller players. The government’s policy of regulating price of sugarcane every year through minimum support price has since been discontinued. Sector demand is driven primarily by population growth and demand from food processing industries, with supply-side competition remaining elevated. The sector also remains exposed to climatic variations and sucrose recovery rates, which have affected production levels and contributed to recent supply-demand gaps.
Assigned ratings also consider the financial risk profile of the Company. Profitability was supported by gains on carryover inventory and higher sugar prices, along with revenue from the power and farming segments. However, margins contracted in early 1QMY25 mainly due to higher procurement costs. Ethanol production is expected to support profitability going forward. Capitalization was supported by equity expansion; gearing though increased slightly by end-MY24 due to borrowings mobilized for installation of ethanol and for higher working capital requirements. However, gearing (based on net debt) decreased considerably by end-1QMY25. Liquidity indicators improved during the period under review due to higher internal cash flow generation. Coverage metrics strengthened in MY24 due to improved profitability and higher fund flows from operations, though some moderation was observed in the subsequent period.
Going forward, ratings will remain sensitive to sector dynamics, including production levels, procurement costs, and policy developments affecting exports and pricing. Profitability will hinge on input-output price alignment and contribution from further revenue streams, including ethanol. The Company’s working capital management, sponsor support, and segment-wise operational stability will be key considerations. Any significant weakening in gearing, liquidity, or coverage metrics may exert pressure on the assigned ratings.
For further information on this rating announcement, please contact at 021-35311861-64 or email at info@vis.com.pk
Applicable Rating Criteria:
Industrial Corporates
https://docs.vis.com.pk/docs/CorporateMethodology.pdf
VIS Issue/Issuer Rating Scale
https://docs.vis.com.pk/docs/VISRatingScales.pdf