Press Release

VIS Reaffirms Entity Ratings of Alliance Sugar Mills (Pvt.) Limited

Karachi, November 12, 2020: VIS Credit Rating Company Limited (VIS) has reaffirmed entity ratings of Alliance Sugar Mills (Pvt.) Limited (ASML) at ‘A-/A-2’ (Single A minus/Single A - Two). The long term rating signifies good credit quality with adequate protection factors. Risk factors are considered variable if changes occur in the economy. Short term rating of ‘A-2’ depicts good certainty of timely payment. Liquidity factors and company fundamentals are sound with good access to capital markets. Risk factors are small. Outlook on the assigned rating is ‘Stable’. The previous rating action was announced on January 20, 2020.

The assigned ratings take into account sponsor profile of the company. ASML operates as a wholly owned subsidiary of RYK Mills Limited (RYK) and is strategically located in Sindh where sucrose content is high. The ratings draw comfort from healthy growth in cash flows on the back on improvement in gross margins. The company’s capacity to meet its financial obligations is considered adequate. However, the ratings are constrained by relatively high leverage indicators although the same has declined as at end-MY20. Financial profile for MY21 is expected to be supported by elevated sugar prices and full year impact of decline in finance cost on the back of reduction in interest rates. Ratings will remain contingent on maintaining sound cash flow coverages and adequate leverage indicators.

Business risk profile of the sugar sector is considered high given the inherent cyclicality in crop levels and raw material prices. Moreover, distortion in pricing mechanism of raw material prices and refined sugar also creates challenges for sugar mills. Given the decline in area under cultivation and the resultant decline in sugar production, average sugar prices increased sharply in MY20.

For further information on this rating announcement, please contact Mr. Talha Iqbal (Ext: 213) or the undersigned (Ext: 201) at (021) 35311861-66 or email at .

Javed Callea

Applicable Rating Criteria: Industrial Corporates (April 2019)

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 2020 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .

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