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June 18 (The following statement was released by the rating agency)
Fitch Ratings has affirmed the rating National Long-Term PT Berlina Tbk, a manufacturer of plastic packaging, at 'A-(idn)' with a Stable Outlook.
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
The increase in leverage while: Leverage as measured by net debt / EBITDA increased to 2.6x in 2013, the above reference in the negative ranking actions 2.0 x, caused mainly by rising costs and capital expenditure intensive. The increase in costs is due primarily to the increase in the minimum wage, the rate increase electricity and the increase in raw material costs due to the depreciation of the rupiah. Meanwhile, capital expenditure is also quite high because companies improve capacity, acquired PT Quantex (lubricating oil bottle manufacturers), and established PT Natura Plastindo (plastics processing company). However, the Fitch believes that the leverage ratio will decrease with improved margins and higher cash flow from increased capacity and new business generated.
Strong relationships with Unilever: Berlina has formed lasting relationships long with major clients, such as Unilever. Relationships with Unilever established more than 40 years, with the Berlina as one of the main suppliers for plastic packaging. Group Unilever (Unilever NV / Unilever PLC ('A +' / Stable)), contribute as much as 69% and 51% of total sales in the Berlina 2013 and 1Q14. Dependence Berlina to group Unilever is the case that positive, given credit and a dominant position in the fast-moving consumer goods.
Cost pass-through mechanism: Berlina has a long-term agreement with customers with cost pass-through scheme mechanism. This helps the company to reduce the risk of foreign currency and raw material prices, and maintain margins are relatively stable in the long term.
Controlled execution risk: The risk of execution in a fairly controlled expansion considering conservative management expansion initiatives. investment to expansion of capacity is usually decided after half or more of the contract sales have been obtained. In addition, the company has some flexibility to reduce or delay capital expenditures if demand slows.
Small-scale operations: Berlina rating scale is limited by operations are small when compared with the manufacturing company rated higher. Small-scale operators are often limited by limited funding flexibility.
Negative: future developments that individually and collectively to lower level:
- Increase the ratio of net debt / EBITDA is sustained above 2.0 x
- EBITDA margins to drop below 14% on an ongoing basis
The rating upgrade is not expected in the medium term because of the scale small operations.