June 20 (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
Negative: future developments that could lead to a negative rating action
-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