TRIS Rating Affirms Company and Issue Ratings of “BJC” at “A+/Stable”

TRIS Rating Co., Ltd. has affirmed the company and issue ratings of Berli Jucker PLC (BJC) at “A+” with “stable” outlook. The ratings reflect solid market positions in key businesses with a portfolio of strong brand names, economies of scale in packaging and tissue paper manufacturing, and an experienced and capable management team. The ratings also take into consideration BJC’s diversified portfolio of business and strong relationships with suppliers and clients. These factors are partially offset by the highly competitive operating environment, especially in the consumer products segment, and exposure to commodity price fluctuations. The impact of the economic slowdown on BJC’s performance is being closely monitored.

The “stable” outlook reflects the expectation that BJC will continue to maintain its competitive strengths through economies of scale, product innovation, and the ability to secure substantial orders of packaging products from Thai Beverage PLC (ThaiBev), the Sirivadhanabhakdi family’s flagship business. BJC is also expected to expand conservatively without causing leverage to rise significantly.

TRIS Rating reported that BJC’s business history in Thailand dates back over a century. A major transformation happened in 2001 when the TCC Group, an investment holding company under the helm of the Sirivadhanabhakdi family, became BJC’s major shareholder. The key business lines comprise 1) industrial supply chain, offering products and services in the areas of packaging, construction and engineering, 2) consumer supply chain, providing consumer products, 3) healthcare supply chain, focusing on medical products and equipment, 4) technical supply chain, offering technical products, chemical products and stationery, and 5) international business group. In 2008, total revenues reached Bt22,047 million. The average annual sales growth rate over the past five years was 10%. In 2008, industrial supply chain represented 52.6% of total revenues, with consumer supply chain at 31.1%, and healthcare supply chain and technical supply chain at 15.9%. The international business group contributed a very small portion of total sales.

BJC’s solid business profile is enhanced through diversification. The cash flows in the packaging business are stable because an affiliate of the major shareholder group is the largest customer, accounting for around 50% of packaging product revenues. Stability is also enhanced by a mix of end markets served, in which around one-third of revenue is from the stable packaged food segment. The company is one of the top two Thai producers of glass bottles, aluminum cans, tissue paper, and snacks. This strong position yields economies of scale in terms of production, bargaining power with suppliers and distributors, and product development costs. Technical support from leading global packaging companies, effective cost saving initiatives, and a strong brand equity in consumer products underscore the company’s competitive edge against peers. Growth in the pharmaceutical products, medical supplies, and medical equipment businesses are expected to remain robust and provide a good balance to the overall portfolio.

BJC’s financial profile is characterized by diversified sources of cash flows, strong liquidity, and a moderate level of leverage. Earnings before interest, tax, depreciation and amortization (EBITDA) margins over the past five years were fairly stable, ranging from 13% to 16%. However, margins have been pressured from intense competition, rising raw material costs, and higher energy prices. The margin abruptly dropped in 2008, mainly due to the extreme fluctuation in raw material prices. The total debt to capitalization ratio stood at 38.77% at the end of 2008. The funds from operations to total debt ratio was 34.08% and the EBITDA interest coverage ratio was 12.42 times. Despite the expectation that cash flow protection measures may weaken over the medium term, BJC’s financial profile remains acceptable on the back of its strong business profile and its ability to generate over Bt2,000 million in cash per annum. TRIS Rating said that key rating concerns for BJC in the medium term are rising production costs, which will squeeze margins; higher leverage; and operating risks. -- End

Company Rating: Affirmed at A+ Issue Rating: BJC113A: Bt3,030 million senior debentures due within 2011 Affirmed at A+ Rating Outlook: Stable Copyright 2009, TRIS Rating Co., Ltd. All rights reserved. Any unauthorized use, disclosure, copying, republication, further transmission, dissemination, redistribution or storing for subsequent use for any purpose, in whole or in part, in any form or manner or by any means whatsoever, by any person, of the credit rating reports or information is prohibited. The credit rating is not a statement of fact or a recommendation to buy, sell or hold any debt instruments. It is an expression of opinion regarding credit risks for that instrument or particular company. The opinion expressed in the credit rating does not represent investment or other advice and should therefore not be construed as such. Any rating and information contained in any report written or published by TRIS Rating has been prepared without taking into account any recipient’s particular financial needs, circumstances, knowledge and objectives. Therefore, a recipient should assess the appropriateness of such information before making an investment decision based on this information. Information used for the rating has been obtained by TRIS Rating from the company and other sources believed to be reliable. Therefore, TRIS Rating does not guarantee the accuracy, adequacy, or completeness of any such information and will accept no liability for any loss or damage arising from any inaccuracy, inadequacy or incompleteness. Also, TRIS Rating is not responsible for any errors or omissions, the result obtained from, or any actions taken in reliance upon such information.

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