TRIS Rating Affirms Company Rating of “ICC” at “AA/Stable”

TRIS Rating Co., Ltd. has affirmed the company rating of I.C.C. International PLC (ICC) at “AA” with “stable” outlook. The rating reflects ICC’s debt-free status, proven capability and experience of the management team, a diverse range of products and brands, and the firm’s position as Thailand’s leading distributor of lingerie, men’s apparel, and cosmetics. ICC has a strategy to develop its own specialty stores while maintaining good relation with both the department store and the modern trade distribution channels. TRIS Rating expects this strategy will help the company sustain its strong market position. The rating also takes into consideration the low profitability typically associated with trading companies, the slowdown in private consumption, declining consumer confidence, and the complex shareholding structure of the Saha Group.

The “stable” outlook reflects the expectation that ICC will maintain solid market shares across its product lines, despite intense competition. A conservative financial policy strongly supports the company’s credit quality. However, the deteriorating profitability, if continued, will be a negative factor for the rating.

TRIS Rating reported that ICC is one of Thailand’s largest wholesalers and distributors, distributing and marketing consumer products, particularly lingerie, apparel, and cosmetics. The company offers more than 100 brands, both foreign and its own brands. Most of its brands, such as Wacoal, Arrow, Lacoste, Guy Laroche, and ELLE, are well accepted by Thai consumers. The competence and experience of ICC’s management team, together with support from suppliers within the Saha Group, have made the company a leading distributor in Thailand and allowed it to maintain market-leading positions. ICC is the leader in the middle- to high-end lingerie market, with a combined market share of 65.4%, measured by sales through department stores. The Wacoal product line is a major contributor, with a market share of around 58%, generating 22% of ICC’s sales in 2008. Lacoste and Arrow products are the main men’s apparel product lines. Men’s apparel now makes up a large portion of total sales, contributing 27% of total sales in 2008.

TRIS rating said, ICC has very conservative financial policies, having been debt-free since 2002. The company has made guarantees to related companies in order to strengthen its supply chain. Though gradually declining, these contingent liabilities remain. The total amount of outstanding guarantee obligation was Bt322 million at the end of March 2009.

ICC’s total sales during 2008 and the first three month of 2009 were Bt10,947 million and Bt2,518 million, which dropped by 2.5% and by 9.3% year-on-year (y-o-y), respectively. The decline in 2008 was due in part to the transfer of the business of the “108 Shop” to Saha Pathanapibul PLC. Sales in the core businesses rose slightly. The economic contraction since the end of 2008, however, has impacted on consumer purchases and pressured the company’s operations in the first three months of 2009. Sales slipped in the first three months of 2009, mainly due to sluggish sales of the main businesses. Sales of lingerie declined by 3.5%, sales of men’s apparel dropped by 20.9%, and sales of cosmetics products fell by 8.1%.

Operating profit margins during 2004-2007 were above 6% and relatively stable. The margins improved to 7.1% in 2008 after efforts to increase the efficiency of the supply chain. However, at the end of March 2009, the current economic crisis pushed the margin down to 4.5%. Falling margins were largely a result of the increase in selling and administrative cost such as promotional and marketing campaigns and the increase in number of counter sales persons. Liquidity remains comparatively strong as the company is debt free and has a stable pattern of operating cash flow. Funds from operations (FFO), which averaged around Bt840 million per annum during 2004-2007, increased to Bt988 million in 2008. However, as a result of the increase in selling and administrative expenses and the economic slowdown, FFO was Bt151 million in the first quarter of 2009.

Though ICC and other Saha Group’s companies have a complex cross-holding structure, all transactions among ICC and companies in the Saha Group conform to the regulations of the Stock Exchange of Thailand (SET) and Securities and Exchange Commission (SEC), said TRIS Rating. -- End

Company Rating: Affirmed at AA 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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