Press Release

JCR-VIS Upgrades Entity Ratings of Shahmurad Sugar Mills Limited to A-

Karachi, February 11, 2015: JCR-VIS Credit Rating Company Limited (JCR-VIS) has upgraded the entity ratings of Shahmurad Sugar Mills Limited (SSML) from ‘BBB+/A-2’ (Triple B Plus/ A-Two) to ‘A-/A-2’ (Single A Minus/ A-Two). Outlook on the assigned rating is ‘Stable’. The previous rating action was announced on November 25, 2013.

Sugar commodity is characterized by in-elastic demand; currently, the industry is under-going a down cycle and prices have remained depressed for an extended time. 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 mainly due to continuity of surplus situation in sugar country wide.

The assigned ratings incorporate overall balance sheet strength built over the years with concurrent improvement in debt repayment capacity. The same has been achieved on the back of diversification in revenue streams through the distillery division, which has provided significant support to profitability. The company has made continued efforts for advancement in ethanol processing and expansion of fermentation plant. These initiatives have notably improved gross margins of ethanol division amidst depressed international prices. Gross margins of the sugar division also depicted improvement on the back of higher sucrose recovery rate and prolonged crushing season during FY14. However, contribution to the bottom line from the sugar division remained nominal; overall profitability has improved substantially due to earnings from the distillery division.

The company’s internal cash generation has resulted in better debt coverage ratios on a timeline basis. The ethanol division is likely to depict reduced gross margins due to continued decline in international prices; however, the impact may be marginalized on account of lower input cost and ongoing improvement in internal efficiency. JCR-VIS will continue to monitor the trend on an on-going basis.

For further information on this rating announcement, please contact Mr. Javed Callea (Ext: 501) or Ms. Sobia Maqbool, CFA (Ext: 604) at 021-35311861-70 (10 lines) or fax to 021-35311873.



Jamal Abbas Zaidi
Deputy CEO


Applicable Rating Criteria:

Industrial Corporates (October 2003) http://www.jcrvis.com.pk/images/IndustrialCorp.pdf

Information herein was obtained from sources believed to be accurate and reliable; however, VIS Credit Rating Company Limited (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. 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. 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 February 11, 2015 VIS Credit Rating Company Limited. All rights reserved. Contents may be used by news media with credit to VIS.