Press Release

JCR-VIS Upgrades Entity Ratings of Shahmurad Sugar Mills Ltd to BBB+

Karachi, August 06, 2009: JCR-VIS Credit Rating Company Limited (JCR-VIS) has upgraded the entity ratings of Shahmurad Sugar Mills Limited (SSML) to ‘BBB+/A-2’ (Triple B Plus/ A-Two) from ‘BBB/A-2’ (Triple B/ A-Two). The rating of SSML’s Rs. 500m Sukuk issue is reaffirmed at ‘A-’ (Single A Minus). Outlook on the ratings is ‘Stable’.

While the preceding year was marked with a bumper sugarcane crop and high production of sugar, the ongoing year has seen shifting of farmers to other crops and decline in cultivation area. This has led to lower sugarcane production and increase in procurement costs. Due to late announcement of the increase in sugarcane support price, total produce is unlikely to increase significantly before the crushing season 2010-11. On account of the current global sugar deficit which is forecasted to persist in FY10 international prices remain high. Although currently availability of significant carryover stock is a stabilizing factor, reduction in the same may lead to further pressure on the import bill and sugar prices. Resultantly, despite significant increase in procurement costs, margins of the sugar division are expected to remain healthy.

The ratings also incorporate diversification provided by the distillery division, which produces ethanol. International oil prices are indirectly linked to ethanol prices, which increased in FY08 leading to high profitability of the division in FY08. Although subsequently world ethanol prices declined in line with global recessionary pressures and to some extent fall in oil prices, further significant movement in the downward direction is not expected in the foreseeable future. SSML has also benefited from the impact of currency devaluation over the last one and half year. In line with improved profitability there has also been improvement in the debt servicing capability of the company.

For further information on this rating announcement, please contact Mr. Safdar Kazi (Ext: 501) or Ms. Sabeen Saleem (Ext: 510) at 021-35311861-70 (10 lines) or fax to 021-35311873.


Faheem Ahmad
President & CEO

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 August 06, 2009 VIS Credit Rating Company Limited. All rights reserved. Contents may be used by news media with credit to VIS.