RPT-Fitch Affirms Indonesia's Berlina Tbk at 'A-(idn)'; Outlook Stable

Thu Jun 20, 2013 2:53am EDT

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June 20 (Reuters) - (The following statement was released by the rating agency)

Fitch Ratings has affirmed Indonesia-based plastic packaging manufacturer, PT Berlina Tbk's (Berlina) National Long-Term rating at 'A-(idn)'. The Outlook is Stable.

The affirmation reflects Berlina's comfortable credit metrics, its position as the second-largest plastic container manufacturer in Indonesia and the continuation of its strong relationship with its main client, PT Unilever Indonesia Tbk. The ratings continue to be constrained by Berlina's limited scale and capital-intensive activities.

KEY RATING DRIVERS

Margin stability: Fitch expects Berlina to maintain a stable EBITDA margin of around 17%-18%, reflecting regular price adjustments with its clients. The pricing arrangements allow Berlina to pass on to clients fluctuations in its raw material prices and foreign-exchange rates.

Unilever concentration positive: Berlina derived about 68% of its revenue in 2012 from PT Unilever Indonesia Tbk, an 85% subsidiary of Unilever NV /Unilever PLC (A+/Stable). Fitch views Berlina's continued reliance on Unilever favourably, owing to its creditworthiness, dominant position and strong growth potential in the Indonesian fast moving consumer goods (FMCG) sector.

Strong credit metrics: Berlina's credit metrics are strong for its ratings. The company's leverage as measured by net debt/EBITDA was 1.4x in 2012, broadly unchanged from 2011. Fitch expects that Berlina will maintain a financial profile appropriate for its rating in the medium term, despite high capex and potential spending on acquisitions in 2013. While there is a risk Berlina's leverage may increase beyond Fitch's negative guidance in 2013, Fitch does not expect this to be sustained.

Liquidity adequate: Berlina has adequate internal cash generation to manage its long-term debt maturities and Fitch believes Berlina would be able to continue rolling over its short-term debt facilities (IDR83bn as at end-December 2012). Current long-term debt amounted to IDR52bn as at end-December 2012, and Fitch expects Berlina's cash flows from operations to comfortably exceed this in 2012. Berlina, however, requires substantial external funding for its large capex in the medium term. Fitch believes the company can secure adequate funding given its financial profile.

Scale and capex intensity: Fitch expects Berlina's free cash flow (FCF) to remain negative in the medium term due to its high capex needs to remain competitive and to maintain its market share in the growing FMCG industry in Indonesia and China. Ongoing investment will also deliver improved efficiencies to its existing operations. However the company has some flexibility in being able to defer some capex should demand slow down. Although Fitch notes investment in additional capacity is incurred usually post securing sales contracts.

RATING SENSITIVITIES

Negative: future developments that could lead to a negative rating action include:

-Failure to maintain plant utilisation at above 70%

-A sustained weakening of Berlina's net debt/ EBITDA at above 2x, due to compression in margin, among others

Positive: Fitch does not expect positive ratings action in the medium term owing to its small business scale relative to higher-rated peers

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