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MOODY’S Investors’ Service will keep its credit ratings for two
Philippine food and beverage manufacturers in the near term amid
slowing economic growth and soaring inflation worldwide.
In a statement, the credit rating company said
it has a stable outlook on the ratings of San Miguel Corp. (SMC) and
Universal Robina Corp. (URC).
The rating company noted that the two food and
beverage makers, along with their peers in Asia, are expanding into
new product lines through acquisitions or organic growth. This move
is in line with efforts to maintain or increase their margins.
Moody’s said SMC, along with Thai Beverage and
Coca-Cola Amatil of Australia are developing non-alcoholic lines to
complement their alcoholic drinks.
“The companies are pursuing the crossovers to
extract synergies from overlapping transport, marketing and
distribution networks for alcoholic and non-alcoholic drinks,” the
rating company said in a recent report on the consumer and retail
sector in Asia. Moody’s noted that Asian drink producers tend to
control their distribution channels unlike counterparts in the West,
which more often favor outsourcing.
It said SMC is trying to diversify away from its
core business into energy, mining, and infrastructural sectors,
adding such a move poses greater risks, and hence more downward drag
on ratings, than diversification into related product lines, which
are more likely to benefit from the firm’s existing brand equity
and solid operating experience.
In this regard, Moody’s said SMC is an
exception. But the conglomerate’s stable outlook reflects a
funding position that remains consistent with a lower rating after
the sale of assets and a subsidiary’s initial public offering to
pay for future purchases in energy, mining and infrastructure, the
rating company said.
In August last year, Moody’s downgraded
SMC’s rating to Ba2 to reflect the uncertainties surrounding the
conglomerate’s planned ventures into non-traditional businesses,
asset disposals, as well as the company’s weaker-than-expected
operating performance. In January this year, the rating company
however raised the outlook for URC’s foreign-currency bond to
positive from stable after a similar change in the Philippines’
country ceiling for foreign currency. The company’s
foreign-currency rating stands at Ba3.
Moody’s said rated consumer firms in the
Asia-Pacific region have managed to navigate an environment of
sustained, higher prices for inputs by passing on the costs to
consumers, as have the retailers, or by keeping margins from
shrinking through innovative packaging and moves to premium brands
or related product lines. It expects its rated issuers to maintain
financial discipline and not pursue the kind of leveraged
acquisitions that occurred in previous years during a more tolerant
and predictable credit and macro environment.
Other consumer products companies and retailers
in Asia Pacific that have been rated are Woolworths of Australia, at
A3 and stable; Shinsegae of South Korea, A3 and stable; Westfarmers
of Australia, Baa1 and stable; Lion Nathan of Australia, Baa2 and
positive; China Fishery Group, B1 and stable; and Matahari Putra
Prima of Indonesia, B1 and stable.
-- Katrina Mennen A. Valdez
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