MIRA INFORM REPORT

Report Date :

19.04.2013

IDENTIFICATION DETAILS

Name :	NOON SUGAR MILLS LIMITED

Registered Office :	66-Garden Block, New Garden Town, Lahore

Country :	Pakistan

Financials (as on) :	30.09.2012

Year of Incorporation :	1964

Com. Reg. No.:	0001858

Legal Form :	Public Limited Company

Line of Business :	Principally engaged in production and sale of white sugar and spirit

No. of Employees :	400 - 500

RATING & COMMENTS

MIRA’s Rating :

RATING		STATUS	PROPOSED CREDIT LINE
41-55	Ba	Overall operation is considered normal. Capable to meet normal commitments.	Satisfactory

Status :	Satisfactory
Payment Behaviour :	No Complaints
Litigation :	Clear

NOTES :

Any query related to this report can be made on e-mail: infodept@mirainform.com while quoting report number, name and date.

ECGC Country Risk Classification List – June 30^th, 2012

Country Name

Previous Rating

(31.03.2011)

Current Rating

(30.06.2012)

Pakistan

Risk Category	ECGC Classification
Insignificant	A1
Low	A2
Moderate	B1
High	B2
Very High	C1
Restricted	C2
Off-credit	D

PAKISTAN - ECONOMIC OVERVIEW

Decades of internal political disputes and low levels of foreign investment have led to slow growth and underdevelopment in Pakistan. Agriculture accounts for more than one-fifth of output and two-fifths of employment. Textiles account for most of Pakistan's export earnings, and Pakistan's failure to expand a viable export base for other manufactures has left the country vulnerable to shifts in world demand. Official unemployment is under 6%, but this fails to capture the true picture, because much of the economy is informal and underemployment remains high. Over the past few years, low growth and high inflation, led by a spurt in food prices, have increased the amount of poverty - the UN Human Development Report estimated poverty in 2011 at almost 50% of the population. Inflation has worsened the situation, climbing from 7.7% in 2007 to almost 12% for 2011, before declining to 10% in 2012. As a result of political and economic instability, the Pakistani rupee has depreciated more than 40% since 2007. The government agreed to an International Monetary Fund Standby Arrangement in November 2008 in response to a balance of payments crisis. Although the economy has stabilized since the crisis, it has failed to recover. Foreign investment has not returned, due to investor concerns related to governance, energy, security, and a slow-down in the global economy. Remittances from overseas workers, averaging about $1 billion a month since March 2011, remain a bright spot for Pakistan. However, after a small current account surplus in fiscal year 2011 (July 2010/June 2011), Pakistan's current account turned to deficit in fiscal year 2012, spurred by higher prices for imported oil and lower prices for exported cotton. Pakistan remains stuck in a low-income, low-growth trap, with growth averaging about 3% per year from 2008 to 2012. Pakistan must address long standing issues related to government revenues and energy production in order to spur the amount of economic growth that will be necessary to employ its growing and rapidly urbanizing population, more than half of which is under 22. Other long term challenges include expanding investment in education and healthcare, adapting to the effects of climate change and natural disasters, and reducing dependence on foreign donors.

Source : CIA

Business Name

NOON SUGAR MILLS LIMITED

Full Address

Registered Address

66-Garden Block, New Garden Town, Lahore, Pakistan

Tel #	92 (42) 35831462, 35831463
Fax #	92 (42) 35831463
Email	noonshr@brain.net.pk

Head office location

IInd Floor Mustafa Center

45-F Main Market Gulnerg

Lahore 54660, Pakistan

Mills Location

Bhalwal, District Sargodha,

Punjab, Pakistan

7th Floor Lakson Square, Building No.3, Sarwar Shaheed Road, Karachi 74200, Pakistan

Short Description Of Business

Nature of Business

Principally engaged in production and sale of

white sugar and spirit

Year Established

1964

Registration #

0001858

Auditors

Hameed Chaudhri & Co.

(Chartered Accountants)

Legal Status

Noon Sugar Mills Limited (the Company) was incorporated in the year 1964 as a Public Limited Company and its shares are quoted on the Stock Exchanges in Pakistan

Details of Management

Names

Designation

Mr. Adnan Hayat Noon

Mr. K. Iqbal Talib

Mr. Salman Hayat Noon

Mr. Amjad Mahmood Agha

Mr. Safdar M. Hayat Qureshi

Mr. Zaheer Ahmad Khan

Mr. Asif Hussain Bukhari

Chairman & Chief Executive

Director

Categories of Shareholders

Categories

Percentage

Directors, CEO and their spouse and minor children

Associated Companies, Undertakings & related parties

NIT & ICP

Banks, Development Finance Institutions, Non Banking Financial Institutions

Insurance Companies

Modarabas & Mutual Funds

General Public

Others

27.17

4.63

0.19

22.25

1.38

5.15

33.03

6.21

Subsidiaries / Associated Companies

(1) Noon International (Pvt) Limited, Pakistan.

(2) Noon Pakistan Limited, Pakistan.

(3) Textile Technics (Pvt) Limited, Pakistan.

(4) Textile Services, Pakistan.

(5) International Enterprises Holdings Ltd, Pakisan.

Products

Principally engaged in production and sale of white sugar and spirit

Number of Employees

400 - 500

Capacity And Production

2012 2011

Sugar Plant

Rated crushing capacity (based

on 160 working days) M.Tons 1,440,000 1,280,000

Cane crushed M.Tons 701,851 600,385

Sugar produced M.Tons 65,684 46,181

Days worked Nos. 114 116

Sugar recovery % 9.36 7.70

Distillery Plant

Rated capacity per day Litres 80,000 80,000

Actual production Litres 22,028,395 17,571,000

Days worked Nos. 307 302

Customers

Various Local (Approximately 250)

Bankers

(1) Allied Bank Limited, Pakistan.

(2) Habib Bank Limited, Pakistan.

(3) MCB Bank Limited, Pakistan.

(4) Standard Chartered Bank, Pakistan.

(5) United Bank Limited, Pakistan.

Financial Position

Sound

Financial Overview

A bumper crop of sugarcane in all sugar producing Provinces of the country resulted in an unprecedentedly large production of sugar. We are pleased to report that your mills not only achieved the highest ever sugar production and highest average Sucrose Recovery during the year under review, the sales revenues of your company also registered an increase of 49% from Rs. 3.1 billion to Rs. 4.6 billion. Both the quantitative and qualitative performance of sugar division improved significantly, in terms of crushing, recovery and production. However, while sugarcane support prices increased by 20% from Rs. 125 per 40Kg to Rs.150 per 40Kg, sugar prices remained depressed all through the year due to surplus production and large stocks in the country. The average sugar prices witnessed a sharp fall of 28% as compared to last year's average whole sale price, as reported by USDA, thus seriously affecting the profitability of most sugar mills. Although, TCP somehow supported the sugar industry by purchasing sugar through local tenders for building buffer stocks but this sugar was subsequently sold at Utility Stores at prices much lower than the retail prices, further eroding the delicately balanced market sentiment. Ironically, such strict price control was exercised only on sugar and on none other far more essential kitchen items, which were openly sold unchecked at high prices. In order to control the limited factors available to them to save the company from a loss situation, your management planned and adopted a prudent borrowing policy. Consequently, the financial charges reduced by Rs.70.236 million as compared to the previous year. In the absence of any term loan, the necessary BMR for sugar plant was completed from internal resources, enabling the mills to now operate smoothly at 9000 TCD, with increased daily sugar production at higher Recovery levels. A large sugar godown with an improvised light pre-fab. structural design was built to accommodate the larger stocks.

The performance of distillery segment was quite satisfactory owing to both, a consistent demand of ethanol in the international market and improved availability of molasses for enhanced production of ethanol. Foreseeing this potential, the management paid special attention to ensure an uninterrupted supply of raw material and other inputs. An increase of 15% in capacity utilization was achieved despite three days per week interruption in natural gas supply, even during the summer months, which greatly handicapped full utilization of production potential of the plants.

Future Outlook

In order to further improve the seasonal average recovery through better maturity of cane, the crushing for the year 2012-13 was delayed by 9 days and commenced on November 30, 2012. Up to December 31, 2012, a total of 211,080 M. Tons cane was crushed and 18,425 M. Tons sugar was produced at an average sucrose recovery of 9.15%, as compared to 257,792 M. Tons crushing and 21,981 M. Tons of sugar production with average sucrose recovery of 8.61% , during the corresponding period last year. The country wide sugarcane crop is expected to be higher in the season 2012-13 as compared to last year but in order to follow the previous year's practice, the Govt. of Punjab has increased the support price of sugar cane by 13% for the current crushing season from Rs.150 per 40 kg to Rs.170 per 40 Kg, announced last year. All the official and private estimates agree that the sugar production of the country is expected to exceed to 5.5 million tons and the Government would take an early decision to allow subsidy of at least Rs. 5 per kg on export of 7 sugar, besides building an adequate buffer stock from regular sugar tenders by TCP for purchases from the local industry, at compatible prices, for consistent supply to the Utility stores and Armed Forces. The sugar market will otherwise, remain under undue pressure and owing to a negative cash flow, most mills will not be able to pay the total amount due to the cane growers for purchase of cane during the current crushing season. The Distillery outlook, though reasonably covered up to Q1, remains relatively uncertain, largely due to Brazil's heavy stocks situation and falling currency, making it more attractive for the importers to take advantage of it in the export price. A massive build up of Corn based ethanol production in US and an almost flat curve of fossil oil prices, closely followed by ethanol market, are also other factors contributing to this uncertainty. However, given the expected depletion in Brazilian ethanol stocks during their Holiday Season, falling in their inter-crop period and much expected impact of EU Duty concession for Pakistani products including Ethanol, the market is likely to stabilize, enabling Pakistan to InshaAllah, continue to hold its traditional position as a reliable sourcing alternative for Far Eastern market.

Memberships

· All Pakistan Sugar Mills Association.(APSMA)

Comments

Subject Company is well known and the directors are resourceful and experienced businessmen. Trade relations are reported as fair. Payments to creditors etc are reported as normal. Subject can be considered for normal business dealings at usual trade terms and conditions.

FOREIGN EXCHANGE RATES

Currency	Unit	Indian Rupees
US Dollar	1	Rs.54.03
UK Pound	1	Rs.82.43
Euro	1	Rs.70.49

INFORMATION DETAILS

Report Prepared by :

MNL

RATING EXPLANATIONS

RATING		STATUS	PROPOSED CREDIT LINE
>86	Aaa	Possesses an extremely sound financial base with the strongest capability for timely payment of interest and principal sums	Unlimited
71-85	Aa	Possesses adequate working capital. No caution needed for credit transaction. It has above average (strong) capability for payment of interest and principal sums	Large
56-70	A	Financial & operational base are regarded healthy. General unfavourable factors will not cause fatal effect. Satisfactory capability for payment of interest and principal sums	Fairly Large
41-55	Ba	Overall operation is considered normal. Capable to meet normal commitments.	Satisfactory
26-40	B	Capability to overcome financial difficulties seems comparatively below average.	Small
11-25	Ca	Adverse factors are apparent. Repayment of interest and principal sums in default or expected to be in default upon maturity	Limited with full security
<10	C	Absolute credit risk exists. Caution needed to be exercised	Credit not recommended
----	NB	New Business	----

This score serves as a reference to assess SC’s credit risk and to set the amount of credit to be extended. It is calculated from a composite of weighted scores obtained from each of the major sections of this report. The assessed factors and their relative weights (as indicated through %) are as follows:

Financial condition (40%) Ownership background (20%) Payment record (10%)

Credit history (10%) Market trend (10%) Operational size (10%)

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