The rating reflects its long track record in the Thai sugar and sugar-cane industry, its efficient plant operations, downstream integration to value-added products and healthy balance sheet.

The rating also takes into consideration the company's increasing exposure to regulatory and operational risks in projects in Laos and Cambodia, the fluctuations in sugar-cane supply and the volatility of commodity prices.

The stable outlook reflects the expectation that Khon Kaen Sugar Industry will maintain its position in the Thai industry. Contributions from ethanol and electricity sales are expected to diversify its revenue base and strengthen profitability. Plantations and mill projects in Laos and Cambodia are expected to be well managed within the budget. The company is expected to maintain its strong financial profile to accommodate increasing business risks in its foreign operations.

TRIS Rating reported that Khon Kaen Sugar Industry ranked among the top five producers in Thailand. During the last 10 years the company and its subsidiary in the group have been able to procure 4-5 million tonnes of cane per year with the Group's cane procurement share ranging between 8 per cent and 10 per cent.

Apart from the sugar business, Khon Kaen Sugar Industry has expanded along the value chain to maximise the utilisation of cane. These businesses include ethanol production and electricity generation. Its ethanol plant commenced operations in early 2006. Ethanol sales yielded impressively, contributing approximately 10 per cent of the company's total sales and 20 per cent of total operating profits for the first nine months of 2006 due mainly to the high price and limited supply of ethanol. The company's 30-MW power plant is expected to begin to supply electricity to the Electricity Generating Authority of Thailand (Egat) late this year.

TRIS Rating said Khon Kaen Sugar Industry had started to invest in sugarcane plantations and sugar plants in Laos and Cambodia this year due to constraints on cane supply in Thailand. The combined investment of these two projects is Bt3.9 billion. Khon Kaen Sugar Industry expects to export raw sugar at higher prices from Laos and Cambodia to the European Union under the EBA (Everything But Arms) scheme. Political, regulatory and operational risks of running sugar plants in those countries remain concerns.