TRIS Rating Co., Ltd. has affirmed the company rating of Advance Agro PLC (AA) at “BBB” with “stable” outlook. The rating reflects the company’s strong position as the leading short-fiber pulp and printing & writing paper (P&W paper) producer in Thailand and its fully integrated and efficient plant. The rating also takes into consideration the relatively stable demand for pulp and paper in both the domestic and export markets, especially in the Asian region. However, these strengths are partially offset by the inherent price volatility in the pulp and paper industry, the negative impact from the stronger baht and increasing energy costs on the operating performance of the company, and the pending business reorganization plan after the management buyout.
The “stable” outlook reflects the expectation that AA will be able to stabilize its operating performance in the medium term despite rising production costs and further Thai baht appreciation. In addition, the debt to equity ratio is expected to remain at the current level despite the investment in the PM#3. The outlook also takes into consideration management’s commitment to disclose financial and operating performance data after delisting, and the intention to re-list. The rating or outlook could be revised after the reorganization or if AA’s operating performance and financial status significantly change from the current levels.
TRIS Rating reported that AA was placed on Credit Alert with a “developing” designation on 9 November 2007 after the management of the company, Mr. Yothin Dumnercharnvanit, offered to buy 99.9997% shares of AA and then delist the firm. As of 31 March 2008, Mr. Yothin successfully acquired 78.52% of AA’s shares, the company was delisted from the Stock Exchange of Thailand (SET) on 16 April 2008. After delisting, the company plans to reorganize by selling all three power plants to National Power Supply Co., Ltd. (NPS), a related company. The proceeds from selling three power plants will be used to partly finance the construction of the third paper mill (PM#3) with a capacity of 210,000 tonnes per annum (tpa) and repay its debts. Management is considering re-listing AA on a regional stock market in 2009. Management is also committed to regular disclosing AA’s operating performance and financial information after delisting.
TRIS Rating said, AA is the leading pulp and P&W paper producer in Thailand. The company owns two pulp mills, with a total production capacity of around 580,000 tpa, and three paper processing machines that provide total capacity of around 558,000 tpa. Around 70% of pulp production is used internally for its paper mills; the remaining is sold in both the domestic and export markets. AA is the largest exporter of short-fiber pulp in Thailand, exporting around 115,715 tonnes of dried pulp in 2006 and 143,808 tonnes in 2007. Based on the sales volume, the company had a 21% share of the domestic P&W paper market in 2007, down from around 23% in the previous year. Around 77% of AA’s consolidated revenues comes from the paper business, while around 16% comes from the pulp business; the rest is from selling electricity and other sources. The sales volumes of pulp and paper in 2007 grew by 9.96% and 8.65%, respectively, from the previous year. Though the prices of pulp and paper in US dollar terms grew more than 7% in 2007, total revenues from pulp and paper in Thai baht terms grew at almost the same level as their sales volumes. This was due to the appreciation of the Thai baht against the US dollar by more than 9% over the last year
As of December 2007, AA’s outstanding debts were Bt11,319 million, down 15% from the previous year as AA early redeemed US$38.34 million in 2007 Senior Notes and US$77.21 million in 2012 Senior Notes. AA’s total debt to capitalization ratio as of December 2007 improved to 43.56% from 48.20% in 2006. However, the debt to capitalization ratio is expected to remain at around 40% in the medium term since the company has to invest to build the PM#3. The investment cost is approximately US$200 million. The company plans to finance this project with around US$100 million in debt and the balance from operating cash flow plus the proceeds from the divestment of the power plants. -- End
Advance Agro PLC (AA)
Company Rating: Affirmed at BBB
Rating Outlook: Stable
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Copyright 2008, 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 AA will be able to stabilize its operating performance in the medium term despite rising production costs and further Thai baht appreciation. In addition, the debt to equity ratio is expected to remain at the current level despite the investment in the PM#3. The outlook also takes into consideration management’s commitment to disclose financial and operating performance data after delisting, and the intention to re-list. The rating or outlook could be revised after the reorganization or if AA’s operating performance and financial status significantly change from the current levels.
TRIS Rating reported that AA was placed on Credit Alert with a “developing” designation on 9 November 2007 after the management of the company, Mr. Yothin Dumnercharnvanit, offered to buy 99.9997% shares of AA and then delist the firm. As of 31 March 2008, Mr. Yothin successfully acquired 78.52% of AA’s shares, the company was delisted from the Stock Exchange of Thailand (SET) on 16 April 2008. After delisting, the company plans to reorganize by selling all three power plants to National Power Supply Co., Ltd. (NPS), a related company. The proceeds from selling three power plants will be used to partly finance the construction of the third paper mill (PM#3) with a capacity of 210,000 tonnes per annum (tpa) and repay its debts. Management is considering re-listing AA on a regional stock market in 2009. Management is also committed to regular disclosing AA’s operating performance and financial information after delisting.
TRIS Rating said, AA is the leading pulp and P&W paper producer in Thailand. The company owns two pulp mills, with a total production capacity of around 580,000 tpa, and three paper processing machines that provide total capacity of around 558,000 tpa. Around 70% of pulp production is used internally for its paper mills; the remaining is sold in both the domestic and export markets. AA is the largest exporter of short-fiber pulp in Thailand, exporting around 115,715 tonnes of dried pulp in 2006 and 143,808 tonnes in 2007. Based on the sales volume, the company had a 21% share of the domestic P&W paper market in 2007, down from around 23% in the previous year. Around 77% of AA’s consolidated revenues comes from the paper business, while around 16% comes from the pulp business; the rest is from selling electricity and other sources. The sales volumes of pulp and paper in 2007 grew by 9.96% and 8.65%, respectively, from the previous year. Though the prices of pulp and paper in US dollar terms grew more than 7% in 2007, total revenues from pulp and paper in Thai baht terms grew at almost the same level as their sales volumes. This was due to the appreciation of the Thai baht against the US dollar by more than 9% over the last year
As of December 2007, AA’s outstanding debts were Bt11,319 million, down 15% from the previous year as AA early redeemed US$38.34 million in 2007 Senior Notes and US$77.21 million in 2012 Senior Notes. AA’s total debt to capitalization ratio as of December 2007 improved to 43.56% from 48.20% in 2006. However, the debt to capitalization ratio is expected to remain at around 40% in the medium term since the company has to invest to build the PM#3. The investment cost is approximately US$200 million. The company plans to finance this project with around US$100 million in debt and the balance from operating cash flow plus the proceeds from the divestment of the power plants. -- End
Advance Agro PLC (AA)
Company Rating: Affirmed at BBB
Rating Outlook: Stable
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Copyright 2008, 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.