Bangkok--22 Sep--Fitch Ratings
Fitch Ratings (Thailand) Limited has today assigned an expected ‘AA+(tha)’ National Long-term rating to Mercedes-Benz (Thailand) Limited’s (MBTh) upcoming THB2.0bn debentures due 2012. The Outlook is Positive. The debentures are guaranteed by MBTh’s parent, Daimler AG (Daimler; Long-term Issuer Default Rating (IDR): ‘BBB+’/Positive).
The debentures’ rating is based entirely on the full, irrevocable and unconditional guarantee provided by Daimler. Daimler’s IDR is one notch below Thailand’s ‘A-’ Long-term local currency IDR. Fitch notes that any International rating divergence between Daimler and Thailand may affect the debentures’ National rating, and that a one-notch change in the global scale rating could result in a change of more than one notch in a National rating.
Daimler’s ratings reflect its solid business profile, including leading global market positions in the premium car, bus, van and truck market, improving geographical diversification, and ample liquidity. However, the ratings are constrained by the high volatility and cyclicality of the markets in which it operates. The most recent economic and sector downturns were unusually simultaneous across regions, and affected all of Daimler’s business divisions. The operating margins of both the Mercedes-Benz Cars (MBC) and Daimler Truck (DT) divisions turned negative in 2009 - to -1.2% (2008: 4.4%; 2007: 9.1%) and -5.5% (in 2008: 5.6%; 2007: 7.5%), respectively. However, profitability and key credit metrics improved sharply in H110, and Fitch expects the trend to continue over the next 12-18 months, and this will support the Positive Outlook.
Daimler’s cash flow from operations (CFO) on adjusted debt returned to levels more adequate for the rating category in 2009 to 68% (2008: negative 20%). Profitability rebounded to 7.1% in H110, as sales recovered sharply across all divisions, and gross adjusted leverage declined to 0.7x at end-June 2010.
Growth prospects for the global premium car segment are better than for volume manufacturers over the next few years, as the former benefited less from vehicle-scrapping incentives in 2009, and should therefore recover more quickly. Together with new product launches in 2010-2011, MBC’s revenue growth and profitability should strengthen, and will serve to partially offset the division’s relative small scale. Likewise, a gradual recovery in economic activity and road freight should support a rebound in the DT division’s revenue. DT’s recent restructuring efforts, improved cost structure and expected sales growth offer good momentum for structurally better profitability.
MBTh is 99.99% owned by Daimler. Since 2000, MBTh has been responsible for the import and wholesale functions of Mercedes-Benz vehicles for distribution in Thailand. Mercedes-Benz brand has enjoyed a good reputation in the domestic premium car segment for decades, with its relatively low after-sales service costs and the high value its vehicles command in the second-hand market. MBTh also provides hire-purchase and leasing services through its wholly-owned leasing subsidiary, Mercedes-Benz Leasing (Thailand) Company Limited.
Contacts:
Primary Analyst
Ekapan Prompraphant
Analyst
+66 2655 4753
Fitch Ratings (Thailand) Limited
Wave Place 13th Fl.
Wireless Road, Lumpini, Patumwan
Bangkok 10330, Thailand
Secondary Analyst
Lertchai Kochareonrattanakul
Senior Director
+66 2655 4760
Committee Chairperson
Jeong Min Pak
Senior Director
+822 3278 8360
Note to Editors: Fitch’s National ratings provide a relative measure of creditworthiness for rated entities in countries with relatively low international sovereign ratings and where there is demand for such 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.
Additional information is available at www.fitchratings.com.
Applicable criteria, 'Corporate Rating Methodology', dated 16 August 2010, and ‘National Ratings - Methodology Update’, dated December 18, 2006 are available at www.fitchratings.com.
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