TRIS Rating Co., Ltd. has affirmed the company rating of Mitr Phol Sugar Corporation Ltd. (MP) at “A”. At the same time, TRIS Rating has assigned a “A” rating to MP’s proposed up to Bt5,000 million senior secured debentures. The rating outlook remains “stable”. The ratings reflect MP’s proven record in the Thai sugar and sugarcane industry, its leading position as the second-largest sugar producer in China, a well-accepted brand name, efficient sugar mill operations, and diversification into related businesses. The ratings also take into consideration fluctuations in sugarcane supply, the volatility of world sugar prices, and regulatory risks in the Thai ethanol market.
The “stable” outlook reflects TRIS Rating’s expectation that the MP Group will maintain its leading position in both the Thai and Chinese sugar industries. MP is expected to maintain its healthy cash flow and financial profile during pursuing business expansion.
TRIS Rating reported that MP was established in 1946 by the Vongkusolkit family. The company is the leader in the Thai sugar and sugarcane industry. Currently, the Vongkusolkit family collectively holds 100% of MP’s shares through Mid-Siam Sugar Co., Ltd. MP operates a total of five sugar mills, four of which are owned by the company, while the other mill belongs to the Vongkusolkit family. The five mills have combined cane crushing capacity of 114,700 cane tonnes per day. During the last five years, the MP Group has held the largest share of the Thai sugar and sugarcane market within the 17%-19% range. For the 2006/2007 production period, the MP Group’s share of sugarcane was 18.9%, followed by Thai Roong Ruang Group (18.1%), Thai Ekkalak Group (14.0%), and KSL Group (8.3%). The MP Group’s sugar production in the 2006/2007 period was 1,296,246 tonnes, up by 45% from the previous year, which was higher than the 39% average growth of the industry. Its crushing yield of 107.55 kilograms (kg.) per cane tonne was better than the industry average of 105.33 kg.
Apart from the sugar business in Thailand, MP has owned and operated five sugar mills in China since 1993 with combined cane crushing capacity of 55,000 cane tonnes per day. The company had a 10% market share in the 2005/2006 period, making it the second largest sugar producer in China. The crushing yield in China was 124.1 kg. per cane tonne in the 2006/2007 period, which was higher than the company’s yield in Thailand. Revenue from the sugar business in China accounted for approximately 51.3% of total sales in 2006, and contributed 66% of MP’s total earnings before interest, tax, depreciation and amortization (EBITDA). In 2006, the company invested Bt2,575 million in a sugarcane plantation and sugar plant in Lao PDR. It plans to sell raw sugar produced in Lao PDR at higher prices to the European Union (EU) under the Everything But Arms (EBA) scheme in 2009.
TRIS Rating said, MP has expanded along the sugar value chain to maximize its utilization of sugarcane in both Thailand and China. These businesses include electricity generation, ethanol production, particle board, and paper mill. In 2006, revenue from the company’s electricity generation and particle board businesses accounted for 10.2% of total sales. Ethanol production started its operation in 2007 with capacity of 200,000 liters per day. Though there has been slow demand for ethanol this year, as the government reversed an earlier decision to discontinue production and distribution of 95-octane gasoline, the ethanol business has been able to generate profits for the company. The new ethanol plant in Kalasin province with capacity of 200,000 liters per day will commence operations in the 2007/2008 period.
MP’s financial performance has been satisfactory. In 2006, total sales were Bt34,828 million, up by 38% from 2005, due mainly to the increased sales from the sugar business in China. The operating income before depreciation and amortization to sales ratio improved from 19.85% in 2005 to 25.23% in 2006, but declined slightly to 21.65% for the first six months of 2007. The company’s total debt to capitalization ratio improved continuously from 82.09% in 2002 to 54.18% in 2006. As of April 2007, the company’s total debt peaked at Bt29,618 million and the ratio increased to 63.60%, due to the seasonality of working capital requirements during the sugarcane crushing period. The proceeds of the proposed senior secured debentures will mainly be used to refinance existing long-term loans and debentures. The bondholders will have the right to claim on collateral pari passu to the bank lender. The collateral package includes land, buildings, and machinery of the sugar mills.
According to TRIS Rating’s report, sugarcane production 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 Thailand in 2006/2007 soared to 63.8 million tonnes, due to the improving water situation and a high preliminary sugarcane price. As water is plentiful, sugarcane production in the 2007/2008 period is expected to be at least the same level as the 2006/2007 period. In China, due to the government’s policy to promote sugarcane, production continuously increased from 75 million tonnes in the 2001/2002 period to 99.78 million tonnes in the 2006/2007 period.
Though the domestic sugar price is relatively stable, the export price is volatile, due to global demand and supply of sugar and related products. The global raw sugar price increased sharply from 10.67 cents/lb in 2004/2005 to 18.93 cents/lb in February 2006, then gradually declined to 11.61 cents/lb in September 2007. A high correlation between sugar and sugarcane prices through the 70:30 revenue sharing system helps stabilize MP’s profit margin and partly mitigates the impact of the appreciation of the Thai baht against the US dollar, said TRIS Rating. -- End
Mitr Phol Sugar Corporation Ltd. (MP)
Company Rating: Affirmed at A
Issue Rating:
Up to Bt5,000 million senior secured debentures due 2008-2012 A
Rating Outlook: Stable
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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 u
The “stable” outlook reflects TRIS Rating’s expectation that the MP Group will maintain its leading position in both the Thai and Chinese sugar industries. MP is expected to maintain its healthy cash flow and financial profile during pursuing business expansion.
TRIS Rating reported that MP was established in 1946 by the Vongkusolkit family. The company is the leader in the Thai sugar and sugarcane industry. Currently, the Vongkusolkit family collectively holds 100% of MP’s shares through Mid-Siam Sugar Co., Ltd. MP operates a total of five sugar mills, four of which are owned by the company, while the other mill belongs to the Vongkusolkit family. The five mills have combined cane crushing capacity of 114,700 cane tonnes per day. During the last five years, the MP Group has held the largest share of the Thai sugar and sugarcane market within the 17%-19% range. For the 2006/2007 production period, the MP Group’s share of sugarcane was 18.9%, followed by Thai Roong Ruang Group (18.1%), Thai Ekkalak Group (14.0%), and KSL Group (8.3%). The MP Group’s sugar production in the 2006/2007 period was 1,296,246 tonnes, up by 45% from the previous year, which was higher than the 39% average growth of the industry. Its crushing yield of 107.55 kilograms (kg.) per cane tonne was better than the industry average of 105.33 kg.
Apart from the sugar business in Thailand, MP has owned and operated five sugar mills in China since 1993 with combined cane crushing capacity of 55,000 cane tonnes per day. The company had a 10% market share in the 2005/2006 period, making it the second largest sugar producer in China. The crushing yield in China was 124.1 kg. per cane tonne in the 2006/2007 period, which was higher than the company’s yield in Thailand. Revenue from the sugar business in China accounted for approximately 51.3% of total sales in 2006, and contributed 66% of MP’s total earnings before interest, tax, depreciation and amortization (EBITDA). In 2006, the company invested Bt2,575 million in a sugarcane plantation and sugar plant in Lao PDR. It plans to sell raw sugar produced in Lao PDR at higher prices to the European Union (EU) under the Everything But Arms (EBA) scheme in 2009.
TRIS Rating said, MP has expanded along the sugar value chain to maximize its utilization of sugarcane in both Thailand and China. These businesses include electricity generation, ethanol production, particle board, and paper mill. In 2006, revenue from the company’s electricity generation and particle board businesses accounted for 10.2% of total sales. Ethanol production started its operation in 2007 with capacity of 200,000 liters per day. Though there has been slow demand for ethanol this year, as the government reversed an earlier decision to discontinue production and distribution of 95-octane gasoline, the ethanol business has been able to generate profits for the company. The new ethanol plant in Kalasin province with capacity of 200,000 liters per day will commence operations in the 2007/2008 period.
MP’s financial performance has been satisfactory. In 2006, total sales were Bt34,828 million, up by 38% from 2005, due mainly to the increased sales from the sugar business in China. The operating income before depreciation and amortization to sales ratio improved from 19.85% in 2005 to 25.23% in 2006, but declined slightly to 21.65% for the first six months of 2007. The company’s total debt to capitalization ratio improved continuously from 82.09% in 2002 to 54.18% in 2006. As of April 2007, the company’s total debt peaked at Bt29,618 million and the ratio increased to 63.60%, due to the seasonality of working capital requirements during the sugarcane crushing period. The proceeds of the proposed senior secured debentures will mainly be used to refinance existing long-term loans and debentures. The bondholders will have the right to claim on collateral pari passu to the bank lender. The collateral package includes land, buildings, and machinery of the sugar mills.
According to TRIS Rating’s report, sugarcane production 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 Thailand in 2006/2007 soared to 63.8 million tonnes, due to the improving water situation and a high preliminary sugarcane price. As water is plentiful, sugarcane production in the 2007/2008 period is expected to be at least the same level as the 2006/2007 period. In China, due to the government’s policy to promote sugarcane, production continuously increased from 75 million tonnes in the 2001/2002 period to 99.78 million tonnes in the 2006/2007 period.
Though the domestic sugar price is relatively stable, the export price is volatile, due to global demand and supply of sugar and related products. The global raw sugar price increased sharply from 10.67 cents/lb in 2004/2005 to 18.93 cents/lb in February 2006, then gradually declined to 11.61 cents/lb in September 2007. A high correlation between sugar and sugarcane prices through the 70:30 revenue sharing system helps stabilize MP’s profit margin and partly mitigates the impact of the appreciation of the Thai baht against the US dollar, said TRIS Rating. -- End
Mitr Phol Sugar Corporation Ltd. (MP)
Company Rating: Affirmed at A
Issue Rating:
Up to Bt5,000 million senior secured debentures due 2008-2012 A
Rating Outlook: Stable
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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 u