RAM Ratings reaffirms Guinness Anchor’s AAA/P1 ratings

Published on 30 October 2012

RAM Ratings has reaffirmed the respective long- and short-term ratings of AAA and P1 of Guinness Anchor Berhad’s (GAB or the Group) RM500 million Commercial Papers/Medium-Term Notes Programme (2011/2018) (CP/MTN); the long-term rating has a stable outlook. GAB is primarily involved in the brewing, marketing and distribution of malt liquor.

The ratings reflect GAB’s leading market position and solid financial profile. Supported by its strong brand equity, continuous marketing efforts and extensive distribution network, the Group has retained its position in the local malt liquor market (MLM). “On their own, GAB’s 3 main brands – Tiger, Guinness and Heineken – command strong positions in the domestic MLM. Tiger has remained one of the top 2 beer brands in Malaysia. At the same time, Guinness and Heineken have retained their position as the most popular brand of stout and premium beer in Malaysia, respectively,” says Kevin Lim, RAM Ratings’ Head of Consumer & Industrial Ratings.

FYE 30 June 2012 (FY Jun 2012) marked GAB’s eleventh consecutive year of growth in revenue and profitability. Despite a slight dip in sales volume, the Group’s revenue was lifted 9.1% year-on-year to RM1.62 billion, driven by higher selling prices. This, coupled with lower input prices, a more favourable sales mix and greater operational efficiencies, enabled the Group to chart a 11.7% increase in operating profit before depreciation, interest and tax (OPBDIT) to RM311.64 million; it recorded a slight uptick in its OPBDIT margin from 18.73% to 19.19%.

As expected, GAB had raised RM200 million of borrowings from its CP/MTN Programme in FY Jun 2012. Nonetheless, its balance sheet remains in line with expectations and is still viewed to be strong. The Group’s gearing ratio came up to 0.53 times while net gearing ratio was conservative at 0.10 times as at end-June 2012. At the same time, its funds from operations debt cover ratio (FFODC) was superior at 1.18 times. With the repayment of RM50 million of its CP in October 2012, GAB’s gearing ratio is envisaged to ameliorate to below 0.5 times while its FFODC is expected to be maintained at above 1 time in FY Jun 2013.

GAB’s credit profile is, nonetheless, affected by several challenges faced by the industry. The industry’s sales volumes are susceptible to tax hikes and the threat of illicit alcohol. While the industry has been spared from tax hikes for the last 7 years, it remains vulnerable to potential future increases; the resultant higher prices of alcohol could affect sales volumes and also contribute to the proliferation of illicit trade. Elsewhere, the ratings are also constrained by the Group’s susceptibility to fluctuating input costs and exposure to regulatory risk given the sensitive nature of the alcohol industry.

Media contact

Low Su Lin

(603) 7628 1071

sulin@ram.com.my