San Miguel Brewery retains highest rating for P38.8-billion bonds

MANILA, Philippines - San Miguel Brewery Inc. (SMB), the flagship brewery of food and beverage conglomerate San Miguel Corp., has retained the PRS Aaa credit rating from Philippine Rating Services Corp. for its outstanding P38.8-billion bond issue.

PhilRatings explained that obligations rated PRS Aaa are of the highest quality, with minimal credit risk, as the issuer’s capacity to meet its financial commitment on the obligation is extremely strong.

Series A of the bonds, amounting to P13.59 billion, will mature in 2012 while Series B, amounting to P22.4 billion, will mature in 2014. Series C (amounting to P2.81 billion) will mature in 2019.

In assigning the rating, PhilRatings took into account the improving economic outlook and private consumption; benefits gained from shareholders, mergers and acquisitions; high cash from operations that can adequately support debt servicing; sustained financial flexibility; strong market position and the company’s experienced management and production team.

“The continued growth of the economy, a sustained rise in public consumption, and tamed inflation will provide a good business environment for SMB to improve earnings this year,” PhilRatings said.

Since June 30, 2009, SMB has been 51 percent-owned by San Miguel and 48.4 percent-owned by Kirin Holdings Co. Ltd. of Japan. 

During the year, SMB acquired its parent company’s international beer business subsidiary, San Miguel Brewing International Ltd. (SMBIL). “Kirin’s international exposure and its long-term vision of being a leading company in Asia and Oceania, as well as SMBIL’s presence in Asia would enable SMB to broaden its participation in the overseas market, as well as further enhance its competitive position,” PhilRatings said.

In the first half of 2010, SMB reported a 34 percent growth in sales from P24.8 billion to P33.3 billion. Net cash from operations grew to P6.5 billion from P5.7 billion.

“SMB’s improved profitability, as well as strong cash generation, has resulted in enhanced liquidity, putting SMB in a good position to pursue its growth initiatives and to consistently build up cash to meet the P13.59 billion Series A bonds which will fall due on April 3, 2012,” PhilRatings said.

SMB continues to solidify its leadership in the Philippine beer industry, increasing its market share from 91 percent in 2000 to 95.8 percent in 2009.

“SMB’s management team has solid experience, having steered the company through periods of economic crisis and instability. PhilRatings believes that the company’s market dominance will continue to be supported by its strong and popular brand portfolio, as well as by its extensive production and distribution systems,” PhilRatings said.

The beer market is expected to continue to grow in the low single-digit levels in 2010-2011. Consumer interest is likely to be boosted by increased competition among market players introducing new product and package variants to tap different segments of the beer market.