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April 14 (The following statement was released by the rating agency)
Fitch Ratings has affirmed the Long-term ratings Issuer Default Rating (IDR) Indonesia Tbk PT Japfa Comfeed (Japfa) at 'BB-' with a Stable Outlook. At the same time, Fitch has affirmed the senior unsecured rating and senior unsecured debt securities denominated in USD dollars will be due in 2018 at 'BB-' which published by Comfeed Finance B.V. Fitch also has affirmed the ratings National Long-term 'A + (idn)' with Stable Outlook and IDR Bonds amounting to EUR 1.5trilyun which will be due in 2017 at 'A + (idn)'.
The ratings reflect Japfa ability to charge a fee (cost pass through), strong growth prospects and flexibility in spending expansion. The ratings remain constrained by the risks inherent to With the outbreak of the disease in the poultry industry.
National ranking in the category 'A' indicates the expectation would risk failure low pay relative to other issuers or securities in Indonesia. However, a change in circumstances or economic conditions may be affect the capacity to pay in a timely manner than commitment Financial shown by the higher rating categories.
Factors Supporting Rating
Strong Market Position: Japfa and its closest competitor, PT Charoen Pokphand Indonesia, controls more than 50% share of poultry feed and day-old chick (DOC), which allow both companies to drive the price. Japfa is Indonesia's second largest operator in poultry feed and DOC to share approximately 20% of the market. Fitch expects the company to maintain its position Future market expansion goes to meet demand growing.
Profit margins are stable: Fitch believes that in general will be able Japfa maintain annual EBITDA margins around 10% in the medium term due to cost pass-through ability. Fitch notes that EBITDA margins per quarter has the potential to fluctuate, as seen decline in 4Q13 to 4% compared with 10% for the whole 2013. In this case, decrease due to increased material costs are rising sharply caused by the weakening of the rupiah. Fitch believes that the imposition of the increase substantial costs and unusual will continue to go hand in hand time, thus allowing the company to maintain an advantage in use within a longer period of time.
Strong Industry Prospects: Poultry Producers in Indonesia to benefit over The good prospects for the industry in the long-term due to the increased current income levels remained at a low level and dominant Muslim populations. Chicken meat is the material most widely consumed in Indonesia due to the cheap price and the limited material choice of meat because of religious considerations.
Risks Inherent Industry: Rating constrained by industrial risks attached as outbreaks of disease in poultry, which can impact against Japfa with weakening consumer sentimenn that led to the reduced demand. We found Japfa ratings can be higher if the company can maintain significant liquidity reserve, which will can help to reduce the impact of exceptional events (exogenous shock).
Controlled Debt: The debt ratio as measured by Net Japfa Debt / EBITDA could exceed 2.5x in 2014 and 2015 - which is the limit where downgrading can be considered due to the expansion expenditure relatively high. Japfa planned capital expenditures over IDR3, 8trilyun (USD 335M) in 2014 and 2015, in which 80% is for expansion. nevertheless Japfa capital expenditure is granular and allow it to be suspended in poor operational environment. Fitch also does not deny the possibility debt levels are lower than expected due to delays capital expenditure due to difficulties in land acquisition for expansion.
Sufficient Liquidity: Fitch believes liquidity sufficient to Japfa current rank. Approximately 34% of total consolidated debt Japfa on December 2013 is a short-term working capital facilities. Fitch predicts Japfa to continue to extend and improve the facilities without much difficulties, due to the flexibility of funding that has been awakened. schedule long-term debt that will mature well distributed with £ 1.5 trillion of bonds maturing in 2017 and USD 225juta maturity in , 2018.
Negative: future developments that may, individually and collectively, triggering the decline include:
- The increase in the debt ratio above 2.5 x on an ongoing basis
- EBITDA margin drop below 8% on an ongoing basis
- Failure to fund (pre-fund) capital expenditure plan
The rating upgrade is not expected within 12 to 18 months due to the large capital expenditures. However, Fitch could be consider an increase in ranking if Japfa able to raise the profile of liquidity are material, either by keeping the loan facility Unused committed and / or maintain cash reserves above USD 200 million to address the impact of exceptional events on revenues, while while maintaining a debt ratio below 2x.