TRIS Rating Co., Ltd. has affirmed the company and issue ratings of Berli Jucker PLC (BJC) at “A+” with “stable” outlook. The ratings reflect strong market positions in key businesses with a portfolio of strong brand names, economies of scale in packaging and tissue paper manufacturing, and an experienced management team. The ratings also take into consideration the company’s diversified portfolio of business and strong relationships with suppliers and clients. These factors are partially offset by the highly competitive operating environment, especially in the consumer product segment, lower consumer confidence amid prolonged political turmoil, and exposure to commodity price fluctuations.
The “stable” outlook is based on the expectation that BJC will sustain its competitive strengths through economies of scale, product innovation, and the ability to secure substantial orders of packaging products from long-term relationship customers. Future investments or acquisitions, if any, should be prudently considered so as to keep leverage from rising significantly.
TRIS Rating reported that BJC was originally engaged in various trading and service activities. The company’s business history in Thailand dates back over a century. A major transformation happened in 2001 when the TCC Group, an investment holding company under the helm of the Sirivadhanabhakdi family, became BJC’s largest shareholder. The key business lines comprise 1) industrial supply chain, offering products and services in the areas of packaging, construction and engineering; 2) consumer supply chain, providing consumer products; 3) healthcare supply chain, focusing on medical products and equipment; 4) technical supply chain, offering technical products, chemical products and stationery; and 5) other business, including international business and information technology. In 2009, total revenues reached Bt22,799 million, up 2.5% from the previous year. Industrial supply chain remains a major revenue contribution, representing 47% of total revenues. Consumer supply chain contributed at 31%, while healthcare and technical supply chains jointly generated 20% of total revenues. The international business and information technology business contributed a small portion of total sales.
TRIS Rating said, BJC’s business profile is characterized by a diversified portfolio of businesses and sources of income. The company has strong market positions in glass bottles, aluminum cans, tissue paper, and snacks. Its market positions are partly supported by demand from its major shareholder group. Sales of healthcare products and medical products & equipment provide a good balance to the overall portfolio. The sizable production base benefits the company with economies of scales, bargaining power with suppliers and distributors, and product development costs. Although facing a highly competitive environment in the consumer product segment, strong brand equity underscores the company’s competitive edge against peers.
BJC’s financial profile remained strong, underpinned by diversified sources of cash flows, sufficient liquidity, and a moderate level of leverage. Operating income before depreciation and amortization as a percentage of sales improved to 12.98%, compared with 11.87% in 2008. The rise was mainly due to some relief in commodity price situations. Funds from operations (FFO) in 2009 grew by 10.3% from the previous year, which strengthened liquidity. The earnings before interest, tax depreciation and amortization (EBITDA) interest coverage ratio remained high while the FFO to total debt ratio increased from 35.5% in 2008 to 43.1% in 2009. BJC’s financial leverage slightly improved in 2009 as measured by a drop in the total debt to capitalization ratio. Short-term debt comprises a significant portion of total borrowings. These funds are used for working capital. TRIS Rating expects BJC to reserve sufficient liquidity as a cushion to mitigate the risk from unfavorable market movements. -- End
Company Rating: Affirmed at A+ Issue Rating: BJC113A: Bt3,030 million senior debentures due 2011 Affirmed at A+ Rating Outlook: Stable
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