Jun 22, 2011

Fitch affirms Berlina rating at BBB(idn)

Fitch Ratings has affirmed Indonesia-based plastic packaging manufacturer Berlina's national long-term rating at BBB(idn) with stable outlook.
The rating reflects Berlina's expertise in plastic packaging, robust industry dynamics, exposure to established customers and sound credit profile.
Berlina's revenues grew by a CAGR of approximately 15% in the past five years and would continue to benefit from the growing fast-moving consumer goods and food&beverage markets in both Indonesia and China. Berlina derives about 67% of its consolidated revenues from Unilever Indonesia and Unilever China, its major customers. 
Although there is no long-term off-take agreement between the companies, the relationship is strong, spanning about 40 years. Fitch considers the relationship to be positive for Berlina's credit profile given Unilever's strong position in the fast moving consumer goods industry. 
Berlina's leverage and coverage measures are also strong for the current rating; in FY10 Berlina's adjusted net debt/operating EBITDAR was 1.6x (1.7x in FY09), and EBITDA/net interest was 4.6x (3.2x). 
Berlina's earnings are also stable, due to frequent adjustment of its selling prices which offset fluctuating raw material costs. 
Gross profit margins (excluding depreciation) have remained range-bound at about 25%-28% in the past 5 years. The rating remains constrained by Berlina's limited scale, with operating EBITDA of Rp96 billion in FY10 and the capital-intensive nature of the business which has resulted in negative free cash flow generation in the past 3 years.
Berlina's expected capex in FY11 and FY12 are substantial; however, Fitch notes that some of this could be deferred if necessary; especially as Berlina is currently running at capacity utilization levels of about 70%.

Disclosure: No position at the stock mentioned above.

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