TRIS Rating Co., Ltd. has assigned the rating of “A+” to the proposed issue of up to Bt3,000 million in senior debentures of Mitr Phol Sugar Corporation Ltd. (MPSC). At the same time, TRIS Rating has affirmed the company and current issue ratings of MPSC at “A+”. The outlook remains “stable”. The proceeds from the new debentures will be used to refinance all of the existing loans of MPSC’s sugar business in Lao PDR and to fund its planned capital expenditures. The ratings reflect the company’s strong market position in the sugar industry both in Thailand and China, a well-accepted brand name, efficient sugar mill operations, diversification into related businesses, and the ability to maintain an acceptable leverage level as the firm expands. The ratings also take into consideration the company’s exposure to the regulatory and operational risks of its overseas sugar operations, as well as the volatility of sugar prices and sugarcane supply.
The “stable” outlook reflects TRIS Rating’s expectation that the MPSC Group will maintain its leading position in both the Thai and Chinese sugar industries. With its lengthy experience in the sugar business and more diversified sources of cash flow from its sugar and related businesses, the company should be able to weather the wide fluctuations in global sugar prices and the unpredictable government measures in China.
TRIS Rating reported that MPSC was established in 1946 by the Vongkusolkit family. The company is the leader in the Thai sugar and sugarcane industry. The Vongkusolkit family collectively holds 100% of the company’s shares through Mid-Siam Sugar Co., Ltd. MPSC operates a total of five sugar mills in Thailand, with a combined cane crushing capacity of 132,500 tonnes per day. As of 18 April 2011, the MPSC Group’s sugar production in Thailand for the 2010/2011 growing season was 1.62 million tonnes, ranked number one with 18.33% market share. The cane crushing yield of MPSC was 107.85 kilograms (kg.) per cane tonne, higher than the industry average of 103.22 kg. per cane tonne. The MPSC Group has maintained the largest market share in terms of sugarcane procured at 17.54%, followed by the Thai Roong Ruang Group (17.30%), the Thai Ekkalak Group (11.14%), the Wangkanai Group (7.93%), and the KSL Group (6.77%).
TRIS Rating said, apart from the sugar business in Thailand, MPSC currently owns and operates seven sugar mills in China with total sugar production of 954,460 tonnes for the 2009/2010 period and 1,030,433 tonnes as of 10 April 2011. The company has been ranked as the second largest sugar producer in China with an 8.91% market share and the crushing yield of 125.57 kg. per cane tonne in the 2009/2010 period. In fiscal year (FY) 2010 (November 2009-October 2010), MPSC’s total sales were Bt55,060 million and total earnings before interest, tax, depreciation and amortization (EBITDA) were Bt11,038 million. Because of favorable sugar prices in China, the sugar business in China accounted for 39.85% of the Group’s total revenue and contributed 56.04% of the Group’s total EBITDA.
MPSC has expanded along the sugar value chain to maximize the utilization of sugarcane. MPSC’s related businesses include electricity generation, ethanol production, particle board, and paper production. MPSC’s ethanol plants in Thailand have a current production capacity of 600,000 liters per day. The EBITDA from the ethanol business continued to increase, rising from Bt1,815 million in FY2009 to Bt2,860 million in FY2010, as a result of higher prices.
MPSC’s financial performance has strengthened. In FY2010, total sales were Bt55,060 million, up by 12.44% from FY2009, due mainly to the higher prices of sugar and ethanol. The operating income before depreciation and amortization to sales ratio improved from 15.56% in FY2009 to 20% in FY2010. During FY2011-FY2012, capital expenditures for new projects will total approximately Bt14,000 million. The major projects planned include an increase in sugar capacity, construction of new sugar and power plants in Thailand, an investment in a medium-density fiberboard project, and an investment in a sugar company in Australia. The company plans to fund these projects by using a combination of cash flow from operations and new borrowings. The total debt to capitalization ratio is expected to be maintained at around 50% during FY2011-FY2012.
TRIS Rating said, global sugarcane production volume and sugar prices are both very volatile. For the 2010/2011 season, sugarcane production in Thailand is over 80 million tonnes, a historical record high, due to the favorable weather. The world raw sugar price in January 2011 was high at 36.11 cents/pound (lb), due to decreased production in Australia. The price eased in March 2011 to approximately 32 cents/lb, due to the increase in sugar production in Thailand. In China, sugar prices typically reflect the domestic demand/supply balance and have been managed by the Chinese government. The sugar price in China rose from approximately RMB5,000 per tonne in 2009/2010 season to more than RMB7,000 per tonne in March 2011. -- End
Company Rating: Affirmed at A+ Issue Ratings: MPSC116A: Bt600 million senior debentures due 2011 Affirmed at A+ MPSC11OA: Bt500 million senior secured debentures due 2011 Affirmed at A+ MPSC126A: Bt600 million senior debentures due 2012 Affirmed at A+ MPSC12OA: Bt500 million senior secured debentures due 2012 Affirmed at A+ MPSC136A: Bt500 million senior debentures due 2013 Affirmed at A+ MPSC136B: Bt100 million senior debentures due 2013 Affirmed at A+ MPSC13DB: Bt1,500 million senior debentures due 2013 Affirmed at A+ MPSC146A: Bt600 million senior debentures due 2014 Affirmed at A+ MPSC156A: Bt600 million senior debentures due 2015 Affirmed at A+ Up to Bt3,000 million senior debentures due within 2018 A+ Rating Outlook: Stable
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