Press Release

JCR-VIS Reaffirms Ratings of Shahmurad Sugar Mills Ltd.

Karachi, August 17, 2010: JCR-VIS Credit Rating Company Limited (JCR-VIS) has reaffirmed the entity ratings of Shahmurad Sugar Mills Limited (SSML) at ‘BBB+/A-2’ (Triple B Plus/ A-Two) and the rating of the company’s Sukuk issue at ‘A-’ (Single A Minus). Outlook on the ratings is ‘Stable’.

The assigned ratings take into account diversification in revenue streams provided by the distillery division, which gives support to seasonal and cyclical nature of operations of the sugar division. The ratings also take into account the location of the sugar mill in the sugarcane cultivation area of Sindh having better sucrose recovery rates.

The low sugarcane crop during the current year’s season led to decline in sugar production and increase in procurement price of sugarcane creating downward pressure on margins despite continued increase in price of sugar. Although higher sugarcane price encouraged farmers to shift to sugarcane production, next season’s crop may be affected by the recent unprecedented floods.

The global surplus of sugar production and increasing carry over stocks has resulted in downward pressure on international prices of sugar since early 2010. Comparatively, domestic sugar prices exhibited firmness and have increased recently on the back of seasonal demand. The impact of floods and supply gap is expected to keep the sugar prices strong over the coming year.

The ratings also take into account improved margins of the distillery division in line with firming up of international oil prices, over the last one year on the back of optimistic global economic forecast. SSML has recently initiated BMR for production of fuel grade ethanol, which is targeted to be completed by October 2010; this is expected to positively impact the distillery margins and profitability along with widening of client base of SSML. JCR-VIS will continue to monitor progress regarding completion of BMR and trends in performance in the aftermath of the recent floods.

For further information on this rating announcement, please contact Mr. Javed Callea (Ext: 501) or Mr. Zia Usmani (Ext: 507) 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 2010 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .