TRIS Rating Co., Ltd. has affirmed the company and issue ratings of Mitr Phol Sugar Corporation Ltd. (MPSC) at “A+” with “stable” outlook. The ratings reflect MPSC’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. 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 world sugar prices and the unpredictable government measures in China. Despite planning for a large amount of capital expenditures during FY2012-FY2014, MPSC is expected to maintain its financial leverage at less than 55% in the medium term.
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 five sugar mills in Thailand, with a combined cane crushing capacity of 146,000 tonnes per day. The MPSC Group’s sugar production in Thailand for the 2010/2011 growing season was 1.87 million tonnes, ranked number one with 19.3% market share. The cane crushing yield of MPSC was 106.10 kilograms (kg.) per cane tonne, higher than the industry average of 101.33 kg. per cane tonne. The MPSC Group has maintained the largest market share in terms of sugarcane procured at 18.5%, followed by the Thai Roong Ruang Group (17.2%), the Thai Ekkalak Group (12%), the Wangkanai Group (7.7%), and the KSL Group (6.5%).
Apart from the sugar business in Thailand, MPSC currently owns and operates seven sugar mills in China which produced 1.03 million tonnes of sugar for the 2010/2011 period. The company is currently the second largest sugar producer in China with a 9.80% market share and a crushing yield of 124.21 kg. per cane tonne in the 2010/2011 period. In fiscal year 2010 (FY2010), November 2009-October 2010, MPSC’s total sales were Bt55,060 million and total earnings before interest, tax, depreciation and amortization (EBITDA) were Bt11,686 million. Because of favorable sugar prices in China, the sugar business of MPSC in China accounted for 39.8% of the Group’s total revenue and contributed 51.5% of the Group’s total EBITDA.
TRIS Rating said, 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 production, and paper production. Currently, MPSC’s ethanol plants in Thailand have a production capacity of 690,000 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.
MPSC’s financial performance has improved. In FY2010, total revenue was Bt55,060 million, up by 12.4% from FY2009, due mainly to the higher selling prices of sugar and ethanol. In the first nine months of FY2011, revenue reached Bt57,680 million, up by 29.4% from Bt44,592 million in the same period of FY2010. Revenue rose because sugar prices were higher in Thailand and China. The operating income before depreciation and amortization to sales ratio improved from 15.56% in FY2009 to 20% in FY2010. During the first nine months of FY2011, the ratio was 25.05%, similar to the ratio of 25.23% in the same period of FY2010. Cash flow protection throughout FY2010 and the first nine months of 2011 strengthened as the ratio of funds from operations (FFO) to total debt increased to 41.28% in FY2010 from 21.60% in FY2009. The ratio was 37.15% (non-annualized) in the first nine months of FY2011, up from 33.76% (non-annualized) in the same period of FY2010. MPSC’s financial leverage improved as the total debt to capitalization ratio improved to 38.96% in FY2010 from 50.85% in FY2009 and 55.71% in FY2008.
Global sugarcane production volumes and sugar prices are both very volatile. For the 2010/2011 season, sugarcane production in Thailand was around 95 million tonnes, a historical record high, due to the favorable weather. The world price for raw sugar in January 2011 was high at 36.11 cents/pound (lb), as production in Australia declined. The price eased in October 2011 to approximately 28 cents/lb, due to a rise 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 around RMB7,400 per tonne in September 2011, said TRIS Rating. -- End
Company Rating: Affirmed at A+ Issue Ratings: MPSC126A: Bt600 million senior debentures due 2012 Affirmed at A+ MPSC12OA: Bt500 million senior secured debentures due 2012 Affirmed at A+ MPSC135B: Bt300 million senior debentures due 2013 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+ MPSC145A: Bt300 million senior debentures due 2014 Affirmed at A+ MPSC146A: Bt600 million senior debentures due 2014 Affirmed at A+ MPSC155B: Bt500 million senior debentures due 2015 Affirmed at A+ MPSC156A: Bt600 million senior debentures due 2015 Affirmed at A+ MPSC165A: Bt600 million senior debentures due 2016 Affirmed at A+ MPSC175A: Bt600 million senior debentures due 2017 Affirmed at A+ MPSC185A: Bt700 million senior debentures due 2018 Affirmed at A+ Rating Outlook: Stable
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