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The Pakistan Credit Rating Agency Limited
Press Release

Date
30-Apr-19

Analyst
Faiqa Qamar
faiqa.qamar@pacra.com
+92-42-35869504
www.pacra.com

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This press release is being transmitted for the sole purpose of dissemination through print/electronic media. The press release may be used in full or in part without changing the meaning or context thereof with due credit to PACRA

PACRA Maintains The Entity Ratings to Jauharabad Sugar Mills Limited

Rating Type Entity
Current
(30-Apr-19)
Previous
(28-Dec-18)
Action Maintain Initial
Long Term BBB BBB
Short Term A2 A2
Outlook Stable Stable
Rating Watch - -

Ratings reflects adequate business profile of Jauharabad Sugar Mills Limited in line with the current dynamics of sugar industry. During 3MFY19, in anticipation of rising sugar prices in the retail segment of the industry, the Company decided to hold around 80% of its stock leading to a decline in the Company’s revenue. Margins remain thin. Over the years, sponsors’ business acumen and support (in the form of loan) have remained beneficial for the Company. The management's consistent attention to improve efficiency is expected to supplement growth maxims. Going forward, the management plans to diversify the Company’s revenue base by setting up a power plant and a distillery. Jauharabad Sugar Mills financial profile remains stretched and is characterized by modestly leveraged capital structure, largely emanating from working capital needs. The Company's cash flows are under pressure, depressing the coverage ratios.
Ratings are dependent upon the management’s ability to improve its revenue while improving the margins and, in turn profitability. Meanwhile, close monitoring of working capital requirements remains critical for the ratings. Any deterioration in the Company’s cashflows and coverages would have a negative impact on the ratings. Streaming the ownership structure remains imperative.

About the Entity
Jauharabad Sugar Mills Limited is a public limited company, listed on Pakistan Stock Exchange since 1973. The Company was acquired from Saigol Group in Oct-13 by Cane Processing (Pvt.) Limited. The Company’s operational crushing unit, having sugarcane crushing capacity of 7000 tons per day, is located in Jauharabad, Khushab District. The Company’s registered office is situated in Cavalry Ground, Lahore Cantonment. The Company is engaged in manufacturing and sale of refined sugar and its by-products; molasses and bagasse.

Jauharabad Sugar Mills is majorly owned by a Holding Company - Cane Processing (Pvt.) Limited (64%) and individuals of the Latif family (23%). The Company has a free float of 10%.

The primary function of PACRA is to evaluate the capacity and willingness of an entity to honor its obligations. Our ratings reflect an independent, professional and impartial assessment of the risks associated with a particular instrument or an entity. PACRA's comprehensive offerings include instrument and entity credit ratings, insurer financial strength ratings, fund ratings, asset manager ratings and real estate gradings. PACRA opinion is not a recommendation to purchase, sell or hold a security, in as much as it does not comment on the security's market price or suitability for a particular investor.