RAM reaffirms ratings of F&N debt facilities
KUCHING: RAM Ratings has reaffirmed the respective AA1(s)/Stable and P1(s) ratings of F&N Capital Sdn Bhd’s RM750 million MTN Programme (2013/2028) and RM750 million CP Programme (2013/2020).
“The debt facilities are backed by full, unconditional and irrevocable corporate guarantees from F&N Capital’s parent, Fraser & Neave Holdings Bhd (F&N). As such, the ratings reflect the credit profile of the group.
“The reaffirmation of the ratings is based on the performance of F&N, which is largely within our expectations. The group is anticipated to retain its dominance in the Malaysian F&B industry,” it said in its notes.
“While its market shares in most of its domestic product segments have been declining, the group has managed to solidify its stronghold in the isotonic beverage segment as well as its leadership in the Thai canned milk market.”
Despite flattish sales growth, F&N delivered stronger operating profit before interest, depreciation and tax in both in FY Sep 2018 and 9M FY Sep 2019, mainly thanks to benign input costs.
Effective July 1, 2019, a 40 sen tax per litre has been imposed on beverages containing more than five grams of sugar per 100
The debt facilities are backed by full, unconditional and irrevocable corporate guarantees from F&N Capital’s parent, Fraser & Neave Holdings Bhd (F&N). As such, the ratings reflect the credit profile of the Group. RAM Ratings
ml. Since the announcement of this tax in November 2018, F&N has been accelerating efforts to reformulate its products.
At present, RAM saw that over 90 per cent of F&N’s beverages have been reformulated with much lower sugar content (using alternative sweeteners in place of sugar). While the higher cost arising from the reformulation is passed on to consumers, the quantum of such price increases is minimal and unlikely to dent sales.
The group’s other offerings that are subject to tax will either be eventually reformulated or introduced in smaller packs to maintain their selling prices.
Meanwhile, the ratings are also supported by F&N’s dominance in several beverage and dairy segments. Despite its reduced market share, the group still leads the overall ready-to- drink ( RTD) segment in Malaysia, accounting for 24.5 per cent of this sphere’s sales in fiscal 2018.
“We note that F&N Holdings has a diversified product lineup and enjoys some degree of geographical diversity,” RAM highlighted.
“That said, the group’s softdrinks operations depend much on 100Plus, which generates half of the division’s sales volumes and substantially all of its profit.
On the other hand, the ratings are moderated by the competitive operating landscape. Intense rivalry within the Malaysian RTD market has affected the Group’s market share.
“” In carbonated soft drinks, F&N Holdings’ market share has been declining for five consecutive years, from 28 per cent in FY14 to 24 per cent in 9MFY19.
“Similarly, its share of the domestic sweetened condensed milk market has also shrunk, from 59 per cent to 51.8 per cent over the same period. Given that F&N’s costs mainly stem from raw materials and packaging, its profit margins are susceptible to the price volatility of these items.” THE Malaysian rubber market closed mixed yesterday as benchmark oil prices firmer performance was capped by losses in regional rubber futures markets, a dealer said.
A dealer said the market was also on a cautious mode amid the prolonged US- China trade tension.
“Traders remain on the sidelines, anticipating next week’s US- China trade talk,” she told Bernama.
At 12 pm, the Malaysian Rubber Board’s official physical price for tyregrade SMR 2.0 eased 4.5 sen to 516.5 sen a kg and latex- in- bulk slipped two sen to 423 sen per kg.
The unofficial closing price for tyre- grade SMR 20 rose 1.5 sen to 519.5 sen per kg, while latex- in- bulk added half sen to 424.5 sen per kg.