Bangkok--18 Aug--Fitch Ratings
Fitch Ratings (Thailand) Limited has today assigned a National Long-term rating of 'A(tha)' to Siam Cement Public Company Limited's (SCC) new unsecured and unsubordinated debentures No.2/2009, amounting up to THB10bn due 2013. The proceeds will be used to refinance the company's maturing debentures.
SCC's (National Long-term rating: 'A(tha)'/Stable Outlook; National Short-term rating: 'F1(tha)') ratings are based on its good revenue diversification, its leading position in each business segment, extensive distribution channels and strong brand recognition in the domestic market. The ratings also reflect the group's relatively strong cash flow generation and solid track record of its senior management.
The ratings also take into account SCC's substantial investments which could lead to leverage rising in 2009. Although the company has already postponed some of its green field projects originally planned in 2009, the investment budget remains high at THB52bn during 2009-2010. In addition to the committed investment plan, SCC is looking for regional acquisitions instead of investing in green field projects which would take longer time to execute and generate cash flow. Fitch also notes that numbers of acquisition deals are currently under feasibility studies and have not been included in the aforementioned budget. Other key credit concerns include its exposure to foreign exchange risks and the execution risk of new investments.
For H109, SCC's operating performance was slightly above the agency's expectation with operating EBITDAR (included dividend income from associates) of THB22.6bn, a decrease of 2% yoy compared with the agency's projected drop of 5.8%. The company's consolidated EBITDAR margin (excluded dividend income from associates) improved to 18% from 13% in H108, thanks mainly to the company's cost saving programs and increased production capacity in its paper and building materials business. SCC's financial leverage as measured by net adjusted debt to last-12-month EBITDAR (included dividend income from associates) was also slightly better than the agency's projection. SCC's liquidity should remain strong despite the tougher operating environment, supported by its cash balance of THB29bn at end-June 2008, as well as its ability to tap the local debt capital market.
The Stable Outlook reflects the expectation that SCC's strong market position and large cash flow base should provide sufficient liquidity and financial flexibility consistent with the current rating level over the medium term. Fitch notes that margin declines or sustained high financial leverage could trigger negative rating action. Meanwhile, stronger-than-expected cash flow generation, which could help improve the company's financial leverage to 2.5x or below on a sustained basis, would positively affect the ratings.
Note to Editors: Fitch's National ratings provide a relative measure of creditworthiness for rated entities in countries with sub- or low-investment grade international sovereign ratings. The best risk within a country is rated 'AAA' and other credits are rated only relative to this risk. National ratings are designed for use mainly by local investors in local markets and are signified by the addition of an identifier for the country concerned, such as 'AAA(tha)' for National ratings in Thailand. Specific letter grades are not therefore internationally comparable.
Contacts: Pimrumpai Panyarachun, Somruedee Chaiworarat, Vincent Milton, Bangkok, +662 655 4755.
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