TRIS Rating Co., Ltd. has downgraded the ratings of Asian Seafoods Coldstorage PLC (Asian) and its Bt300 million senior debentures (ASC094A) to “BBB” from “BBB+” with “stable” outlook. The ratings reflect the company’s experienced and capable management team and its diverse products and markets. However, these strengths are partially offset by the competitive and volatile nature of the seafood industry, the company’s relatively small size compared with global players, trade barriers implemented by major importing countries, a significant rise in financial leverage, and the high volatility of the Thai baht.
The “stable” outlook reflects the expectation that Asean will be able to fully realize the benefits from the integration of the feed business and build markets for the tuna business. TRIS Rating will focus on the company’s progress in reducing its financial leverage over the next 2-3 years. In addition, operating margins are expected to remain at the current levels.
TRIS Rating reported that Asian is a medium-sized seafood producer in Thailand, with total revenues expected around Bt8 billion in 2006. Most of the company’s management team are experienced in the seafood business and have worked with the company for more than ten years. Asian offers a variety of products ranging from basic products like raw shrimp to more value-added products, such as breaded shrimp and sashimi, which require more highly-skilled workers. In addition, Asian has a unique niche market: sillago fish products. A broad product line and long-term relationships with clients in various countries provide Asian with operational flexibility. Asian exports most of its seafood products primarily to the US, Japan, and the EU.
TRIS Rating said, during 2006, Asian expanded its line of business by adding two products: canned tuna and shrimp feed. In January 2006, Asian purchased STC Feed Co., Ltd. (STC Feed), a shrimp-feed manufacturer, from Capital Rice Co., Ltd. (Capital Rice) at Bt275 million. In exchange, Capital Rice has become Asian’s second largest shareholder, owning 16% through the exercise of Asian’s warrants. In the fourth quarter of 2006, Asian completed construction of a Bt1-billion tuna plant with an initial production capacity of 70 tonnes per day. The first shipment of canned tuna is expected in early 2007.
Seafood producers face fluctuations in raw material and product prices. Profit and cash flow are somewhat seasonal and volatile. Although Asian is a medium-sized Thai seafood exporter, it is considered a small company relative to many large global players. This puts the company at a disadvantage in terms of economies of scale and full vertical and horizontal integration. Trade barriers imposed by importing countries continue to be a major threat for seafood exporters except medium- to large-sized companies, including Asian, that could have benefits from the regulations, as many small operators may not be able to comply with the stricter rules and may be shut out of certain markets in the future.
TRIS Rating said, because of the acquisition of STC Feed and the investment in the tuna processing plant, Asian’s debt level has risen considerably, resulting in a weakened financial profile. Its operating margins dropped slightly as the baht strengthened and more provisions were reserved on bad debts of the feed business. The debt to capitalization ratio increased from 48.1% in 2005 to 69.4% as of September 2006. The earnings before interest, tax, depreciation, and amortization (EBITDA) interest coverage ratio dropped from 4.9 times in 2005 to 2.0 times for the nine-months ended September 2006. Asian’s relatively narrow operating margins and moderate business size makes its financial profile to a certain extent vulnerable to large investment requirements and baht volatility. Nevertheless, liquidity remains sufficient as most short-term funding is through trade financing. The company’s available credit lines from various financial institutions were about Bt900 million as of September 2006. -- End
Asian Seafoods Coldstorage PLC (Asian)
Company Rating: Downgraded to “BBB” from “BBB+”
Issue Rating:
ASC094A: Bt300 million senior debentures due 2009 Downgraded to “BBB” from “BBB+”
Rating Outlook: Stable
-------------------------------------------------------
Copyright 2007, 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 Asean will be able to fully realize the benefits from the integration of the feed business and build markets for the tuna business. TRIS Rating will focus on the company’s progress in reducing its financial leverage over the next 2-3 years. In addition, operating margins are expected to remain at the current levels.
TRIS Rating reported that Asian is a medium-sized seafood producer in Thailand, with total revenues expected around Bt8 billion in 2006. Most of the company’s management team are experienced in the seafood business and have worked with the company for more than ten years. Asian offers a variety of products ranging from basic products like raw shrimp to more value-added products, such as breaded shrimp and sashimi, which require more highly-skilled workers. In addition, Asian has a unique niche market: sillago fish products. A broad product line and long-term relationships with clients in various countries provide Asian with operational flexibility. Asian exports most of its seafood products primarily to the US, Japan, and the EU.
TRIS Rating said, during 2006, Asian expanded its line of business by adding two products: canned tuna and shrimp feed. In January 2006, Asian purchased STC Feed Co., Ltd. (STC Feed), a shrimp-feed manufacturer, from Capital Rice Co., Ltd. (Capital Rice) at Bt275 million. In exchange, Capital Rice has become Asian’s second largest shareholder, owning 16% through the exercise of Asian’s warrants. In the fourth quarter of 2006, Asian completed construction of a Bt1-billion tuna plant with an initial production capacity of 70 tonnes per day. The first shipment of canned tuna is expected in early 2007.
Seafood producers face fluctuations in raw material and product prices. Profit and cash flow are somewhat seasonal and volatile. Although Asian is a medium-sized Thai seafood exporter, it is considered a small company relative to many large global players. This puts the company at a disadvantage in terms of economies of scale and full vertical and horizontal integration. Trade barriers imposed by importing countries continue to be a major threat for seafood exporters except medium- to large-sized companies, including Asian, that could have benefits from the regulations, as many small operators may not be able to comply with the stricter rules and may be shut out of certain markets in the future.
TRIS Rating said, because of the acquisition of STC Feed and the investment in the tuna processing plant, Asian’s debt level has risen considerably, resulting in a weakened financial profile. Its operating margins dropped slightly as the baht strengthened and more provisions were reserved on bad debts of the feed business. The debt to capitalization ratio increased from 48.1% in 2005 to 69.4% as of September 2006. The earnings before interest, tax, depreciation, and amortization (EBITDA) interest coverage ratio dropped from 4.9 times in 2005 to 2.0 times for the nine-months ended September 2006. Asian’s relatively narrow operating margins and moderate business size makes its financial profile to a certain extent vulnerable to large investment requirements and baht volatility. Nevertheless, liquidity remains sufficient as most short-term funding is through trade financing. The company’s available credit lines from various financial institutions were about Bt900 million as of September 2006. -- End
Asian Seafoods Coldstorage PLC (Asian)
Company Rating: Downgraded to “BBB” from “BBB+”
Issue Rating:
ASC094A: Bt300 million senior debentures due 2009 Downgraded to “BBB” from “BBB+”
Rating Outlook: Stable
-------------------------------------------------------
Copyright 2007, 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.