Tris Rating has affirmed the company rating on import and export firm Berli Jucker Plc (BJC) and the ratings on its outstanding senior unsecured debentures at A+. The company has proposed issuing 16 billion baht in senior unsecured debentures for use in refinancing existing debts, investments and working capital.
The A+ rating reflects BJC's competitive position in its core businesses, as well as a diverse range of businesses and sources of income and broad market coverage. The rating also reflects the company's resilient operating results, growth opportunities in markets abroad and the integration of BJC's major lines of business with the retail outlets of Big C Supercenter Plc.
At the same time, these factors are partly offset by high financial leverage resulting from the debt-financed acquisition of Big C amid intense competition in consumer goods and retailing.
According to Tris, the retail industry in Thailand showed signs of a slowdown and almost all listed retailers showed same-store sales declines during the third quarter of 2018. Big C's same-store sales, however, grew by 2.5% year-on-year.
For the year to September 2018, BJC's operating results were satisfactory as sales reached 114.916 billion baht. Operating income, including Big C's rental and service income, was 11.836 billion baht, a 9% increase year-on-year, and earnings before interest, tax, depreciation and amortisation (ebitda) was 16.7 billion baht, a 7% increase year-on-year.
Leverage remained high as the company used partial funds from operations to open new retail outlets, whereas the ratio of total debt to capitalisation remain unchanged from September 2017 at 59.3%.
Tris forecasts BJC's financial leverage to gradually decline over the next two years, assuming there are no large debt-funded acquisitions or investments. The debt-to-capitalisation ratio is forecast at 50% and net debt to ebitda is expected to reach 4 by 2020, based on assumptions that operating results stay strong and the management team remains committed to deleveraging.
BJC's long-term loans and debentures due in 2019 and 2020 are estimated at 46 billion and 36 billion baht.
The stable outlook reflects the expectation that BJC will maintain a competitive position and make sustainable improvements in its financial profile.