TRIS Rating Co., Ltd. has assigned the company rating of Khon Kaen Sugar Industry PLC (KSL) at “A-” with “stable” outlook. The rating reflects KSL’s long track record in the Thai sugar and sugarcane industry, its efficient sugar plant operations, downstream integration to value-added products, and healthy balance sheet. The rating also takes into consideration the company’s increasing exposure to regulatory and operational risks in sugar projects operated in Laos and Cambodia, the fluctuations in sugarcane supply, and the volatility of sugar commodity prices.
The “stable” outlook reflects the expectation that KSL will maintain its position in the Thai sugar industry. Contributions from ethanol and electricity sales are expected to diversify its revenue base and strengthen profitability. Sugarcane plantations and sugar mill projects in Laos and Cambodia are expected to be well managed within the budget. The company is expected to maintain its strong financial profile to accommodate increasing business risks in its foreign operations.
TRIS Rating reported that KSL is one of the leading sugar producers in Thailand. The company was established in 1945 by the Chinthammit family and associates. Currently, the company owns and operates four sugar plants in Khon Kaen, Kanchanaburi and Chonburi provinces with the combined cane crushing capacity of 66,000 cane tonnes per day. With long track record, KSL has been ranked among the top five sugar producers in Thailand. During the last ten years KSL, and companies in the KSL Group have been able to procure 4-5 million tonnes of sugarcane per year with the Group’s sugarcane procurement share ranged between 8%-10%. For the 2005/2006 production period, the KSL Group’s market share was 8.6%, ranked number four following the Mitr Phol Group (17.9%), Thai Roong Ruang Group (14.5%) and Thai Ekkalak Group (13.8%). The company’s crushing yield for the 2005/2006 period, based on standard sugarcane, was 95.41 kilograms (kg.) per cane tonne, better than the industry average of 92.92 kg. Apart from the sugar business, KSL has expanded along the sugar value chain to maximize the utilization of sugarcane. These businesses include ethanol production and electricity generation. Its ethanol plant commenced operations in early 2006. Ethanol sales yielded impressive performance, contributing approximately 10% of KSL’s total sales and 20% of total operating profits for the first nine months of 2006 due mainly to the high price and limited supply of ethanol. KSL’s 30-MW power plant is expected to begin to supply electricity to Electricity Generating Authority of Thailand (EGAT) in late 2006.
TRIS Rating said, KSL started to invest in sugarcane plantations and sugar plants in Laos and Cambodia in 2006 due to constraints on sugarcane supply in Thailand. The combined investment of these two projects is Bt3,900 million. KSL expects to export raw sugar at higher prices from Laos and Cambodia to the European Union (EU) under the EBA (Everything But Arms) scheme. Political, regulatory and operational risks of running sugar plants in those countries remain concerns.
Sugarcane production volume in Thailand has been very volatile, depending on natural rainfall, plantation area, and cane prices relative to competing products. After declining continuously from a historic high of 74 million tonnes in the 2002/2003 production period, to 47 million tonnes in 2005/2006, sugarcane production in 2006/2007 is expected to increase to 60 million tonnes, due to the improving water situation and higher sugar and sugarcane prices. The world raw sugar price increased sharply from 10.69 cents/lb in 2004/2005 to 16.74 cents/lb in January 2006, then declined to 11.58 cents/lb in October 2006.
KSL’s balance sheet has been strong. As of July 2006, Its total debt was Bt3,092 million against an equity base of Bt7,483 million as of July 2006. Its total debt to capitalization ratio continued to be strong, though rising from 8.25% in 2005 to 29.24% at the end of July 2006, due to working capital requirements during the sugar production period and capital expenditures for the ethanol and power plant projects. Though the company faces volatility in sugarcane supply and sugar price risk, the operating income before depreciation and amortization to sales ratio remained relatively stable, ranging from 13%-15% during the last five years, due partly to the revenue sharing system of Thailand’s sugar and sugarcane industry, said TRIS Rating. -- End
Khon Kaen Sugar Industry PLC (KSL)
Company Rating: A-
Rating Outlook: Stable
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Copyright 2006, 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.
The “stable” outlook reflects the expectation that KSL will maintain its position in the Thai sugar industry. Contributions from ethanol and electricity sales are expected to diversify its revenue base and strengthen profitability. Sugarcane plantations and sugar mill projects in Laos and Cambodia are expected to be well managed within the budget. The company is expected to maintain its strong financial profile to accommodate increasing business risks in its foreign operations.
TRIS Rating reported that KSL is one of the leading sugar producers in Thailand. The company was established in 1945 by the Chinthammit family and associates. Currently, the company owns and operates four sugar plants in Khon Kaen, Kanchanaburi and Chonburi provinces with the combined cane crushing capacity of 66,000 cane tonnes per day. With long track record, KSL has been ranked among the top five sugar producers in Thailand. During the last ten years KSL, and companies in the KSL Group have been able to procure 4-5 million tonnes of sugarcane per year with the Group’s sugarcane procurement share ranged between 8%-10%. For the 2005/2006 production period, the KSL Group’s market share was 8.6%, ranked number four following the Mitr Phol Group (17.9%), Thai Roong Ruang Group (14.5%) and Thai Ekkalak Group (13.8%). The company’s crushing yield for the 2005/2006 period, based on standard sugarcane, was 95.41 kilograms (kg.) per cane tonne, better than the industry average of 92.92 kg. Apart from the sugar business, KSL has expanded along the sugar value chain to maximize the utilization of sugarcane. These businesses include ethanol production and electricity generation. Its ethanol plant commenced operations in early 2006. Ethanol sales yielded impressive performance, contributing approximately 10% of KSL’s total sales and 20% of total operating profits for the first nine months of 2006 due mainly to the high price and limited supply of ethanol. KSL’s 30-MW power plant is expected to begin to supply electricity to Electricity Generating Authority of Thailand (EGAT) in late 2006.
TRIS Rating said, KSL started to invest in sugarcane plantations and sugar plants in Laos and Cambodia in 2006 due to constraints on sugarcane supply in Thailand. The combined investment of these two projects is Bt3,900 million. KSL expects to export raw sugar at higher prices from Laos and Cambodia to the European Union (EU) under the EBA (Everything But Arms) scheme. Political, regulatory and operational risks of running sugar plants in those countries remain concerns.
Sugarcane production volume in Thailand has been very volatile, depending on natural rainfall, plantation area, and cane prices relative to competing products. After declining continuously from a historic high of 74 million tonnes in the 2002/2003 production period, to 47 million tonnes in 2005/2006, sugarcane production in 2006/2007 is expected to increase to 60 million tonnes, due to the improving water situation and higher sugar and sugarcane prices. The world raw sugar price increased sharply from 10.69 cents/lb in 2004/2005 to 16.74 cents/lb in January 2006, then declined to 11.58 cents/lb in October 2006.
KSL’s balance sheet has been strong. As of July 2006, Its total debt was Bt3,092 million against an equity base of Bt7,483 million as of July 2006. Its total debt to capitalization ratio continued to be strong, though rising from 8.25% in 2005 to 29.24% at the end of July 2006, due to working capital requirements during the sugar production period and capital expenditures for the ethanol and power plant projects. Though the company faces volatility in sugarcane supply and sugar price risk, the operating income before depreciation and amortization to sales ratio remained relatively stable, ranging from 13%-15% during the last five years, due partly to the revenue sharing system of Thailand’s sugar and sugarcane industry, said TRIS Rating. -- End
Khon Kaen Sugar Industry PLC (KSL)
Company Rating: A-
Rating Outlook: Stable
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Copyright 2006, 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.