JCR-VIS as­signs ini­tial en­tity rat­ings to De­harki Su­gar Mills Ltd

Pakistan Observer - - ECONOMY WATCH -

KARACHI—JCR-VIS Credit Rat­ing Com­pany Lim­ited has as­signed ini­tial en­tity rat­ings of ‘A-/A-2’ (sin­gle A Mi­nus/A-Two) to De­harki Su­gar Mills (Pri­vate) Lim­ited (DSMI). The out­look on the as­signed rat­ings is ‘sta­ble’, said a press re­lease here on Wed­nes­day. The rat­ings as­signed to DSML take into ac­count its as­so­ci­a­tion with JDW Su­gar Mills Lim­ited (JDWSML), the largest su­gar man­u­fac­tur­ing group in the coun­try. Be­ing a wholly owned sub­sidiary of JDWSML, the com­pany draws var­i­ous ben­e­fits from its par­ent in­clud­ing op­er­a­tional in­te­gra­tion while JDWSL has also ex­tended ad­vances to DSML to meet work­ing cap­i­tal re­quire­ment.

The rat­ings also draw com­fort from the avail­abil­ity of per­sonal guar­an­tees of par­ent’s di­rec­tors on bor­row­ing availed by DSML. DSML op­er­ates with an in­stalled ca­pac­ity of 13,000 tons/day. Pro­duc­tion date for the 2015-16 crush­ing sea­sons re­flect healthy growth in su­gar pro­duc­tion while re­cov­ery rates have also re­mained sta­ble. Var­i­ous func­tions are shared be- tween JDWSML and DSML in­clud­ing in­for­ma­tion tech­nol­ogy, au­dit and fi­nance. In ad­di­tion to this, se­nior man­age­ment team of JDWSML also man­ages DSML op­er­a­tions.

Net sales have de­picted steady growth in the re­cent years while mar­gins have re­mained a func­tion of pro­cure­ment price of sug­ar­cane and re­tail su­gar prices. Man­age­ment ex­pect mar­gin to im­prove dur­ing the on-go­ing year on ac­count of im­prove­ment in re­tail prices. In line with re­duc­tion in bench­mark rates and lower av­er­age bor­row­ing, fi­nance cost has shown down­ward trend. Man­age­ment has pro­jected the prof­itabil­ity to grow at 10 per­cent per an­num over the next five year. Cap­i­tal struc­ture of the com­pany wit­nessed im­prove­ment on ac­count of re­ten­tion of prof­its trans­lat­ing into de­cline in debt lever­age and gear­ing in­di­ca­tors. Long-term debt rep­re­sent around 45 per­cent of to­tal bor­row­ing while re­main­ing bor­row­ing per­tains to work­ing cap­i­tal re­quire­ment with vary­ing out­stand­ing lev­els dur­ing the year.—APP

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