TEXT-Fitch revises CCL Products' otlk to pos; afrms 'Fitch A-(ind)'

(The following statement was released by the rating agency)

July 03 - Fitch Ratings has revised India-based CCL Products (India) Limited's (CCL) Outlook to Positive from Stable. Its National Long-Term rating has been affirmed at 'Fitch A-(ind)'. A list of additional rating actions is provided at the end of this commentary.

The Outlook revision reflects the successful completion of CCL's 10,000 metric tonne per annum (mtpa) coffee manufacturing plant in Vietnam. Although the new facility is likely to improve revenue and financial leverage in FY13 (year end March), the extent to which the facility will be utilised remains to be seen.

The ratings reflect CCL's strong revenue growth of 37.5% yoy to INR5.2bn (provisional) in FY12 due to increased volumes, with near stable EBITDA margins of 17.4% (17.7%). Net debt/EBITDA also improved to 2.99x (FY11: 3.23x) and EBITDA interest coverage to 5.7x (4.1x) due to an increase in EBITDA to INR873m (INR647m). The ratings are also supported by International Coffee Organization's positive outlook for the coffee sector.

Positive rating action may result from contribution from the new facility leading to net debt/EBITDA below 2.5x on a sustained basis. Conversely, the Outlook will be revised back to Stable if CCL is not able to utilise its Vietnam plant as per management's expectations leading to lower growth in revenue and profit.

CCL is a Hyderabad-based instant coffee manufacturer and recognized as a 100% export-oriented unit. It has a capacity to manufacture 19,000 MTPA of coffee at its plant near Tenali in Andhra Pradesh. CCL also has an agglomeration plant in Switzerland (commissioned in FY11).

Rating actions on CCL's bank loans:

- INR175m term loan: affirmed at National Long-Term 'Fitch A-(ind)'

- INR1,500m fund-based working capital limits: affirmed at National Long-Term 'Fitch A-(ind)' and National Short-Term 'Fitch A1(ind)'

- INR164.5m non-fund based working capital limits: affirmed at National Short-Term 'Fitch A1(ind)'

- USD5m stand-by letter of credit facility: National Short-Term 'Fitch A1(ind)'; rating withdrawn as the facility no longer exists