Bangkok--Sep 24--Fitch Ratings (Thailand)
Fitch Ratings (Thailand) Limited has today assigned a Long-term National rating of ‘A(tha)’ to The Siam Cement Plc’s (“SCC”) unsecured unsubordinated debentures No.2/2004 of up to THB10 billion due 2008. The rating Outlook is Stable. The newly-issued debentures will be used to fund part of SCC’s and its subsidiary’s — The Siam Pulp and Paper Plc’s (“SPP”) - THB11bn debentures maturing in 4Q04.
The rating is based on SCC’s strengthening debt profile, continued recovery in its core earnings as well as projected solid operating performance. Fitch notes SCC’s efforts to reduce debt, improve core earnings and divest non-core assets have underpinned its financial recovery. The company has reported positive net free cash flow over the past three years. Its consolidated net debt to last-12-month EBITDA ratio declined to 2.9x at end-1H04 (from 3.5x at end-2003), or 2.6x including dividend income from associates and other companies. The company’s financial leverage should continue to improve, with its net debt to EBITDA ratio expected to stay below 3.0x for the remainder of 2004 and to reach around 2.0x by end-2005. At end-1H04, SCC’s consolidated total debt was THB110.9bn (down from THB117.2bn at end-2003), consisting of 36% short-term debt and 64% long-term debt, most of which has now been funded via the domestic bond market. The company’s strengthened financial position and strong operating cash flow should enable SCC to absorb new investment costs and weather volatility in the performances of its core businesses.
In terms of investments, most of the SCC group’s capex during 2004/05 is likely to be invested in the paper and packaging division. During 2004, SPP increased its stake in Phoenix Pulp and Paper Plc (“PPPC”) to 77.8% from 64% at end-2003. SPP has also tendered an offer for all remaining shares in PPPC. The total acquisition cost of PPPC shares is estimated at about THB4bn. As it is currently utilising full capacity of its paper operations, during 2005/06, SPP intends to increase its capacity in the printing and writing paper sector as well as debottleneck its industrial paper production. SPP’s other investment plans include the improvement of fuel cost efficiency at United Pulp and Paper (“UPPC”) in the Philippines as well as Thai Cane Paper Plc (“TCP”). For the petrochemical division, SCC purchased an additional 13.5% stake of Thai Plastic and Chemicals Plc (“TPC”) during 2004, increasing its stake to 39.6% at an investment cost of approximately THB2bn. At present, no major capex is budgeted for cement and petrochemical divisions.
SCC reported a strong year-on-year increase in consolidated net income of 66% to THB15.1bn in 1H04, mainly on the back of strong operations, higher equity contributions from associates (mainly petrochemicals and steel) as well as a continued reduction in interest expenses. The company’s consolidated EBITDA reached THB21.3bn in 1H04 (up 34% year-on-year) largely thanks to the exceptionally strong operating result at its petrochemicals division as well as robust performances of its cement and building products businesses. Meanwhile, the paper and packaging division reported a flat EBITDA owing to rising raw material costs. Fitch notes that the positive outlook on the construction sector and domestic economic growth (the main earnings driver of the cement and building products divisions), coupled with the upward trend in petrochemicals products, should continue to underpin SCC’s strong operating performance during 2004 and 2005.
CONTACT: Orawan Karoonkornsakul, CFA, Director, Corporates, Bangkok, Tel: +662 655 4766; Wasant Polcharoen, Analyst, Corporates, +662 655 4763; Lertchai Kochareonrattanakul, Associate Director, Corporates, +662 655 4760; Vincent Milton, Managing Director, +662 655 4759.
Note to Editors: Fitch’s National ratings provide a relative measure of creditworthiness for rated entities in countries where the sovereign’s foreign and local currency ratings are below ‘AAA’. National ratings are not internationally comparable since the best relative risk within a country is rated ‘AAA’ and other credits are rated only relative to this risk. They are signified by the addition of an identifier for the country concerned, such as ‘AAA (tha)’ for National ratings in Thailand. End.
--InfoQuest (NT)--