SMC brewery retains highest rating

MANILA, Philippines - The brewery unit of diversified conglomerate San Miguel Corp. has retained the top credit score for its P45.21-billion existing bonds.

Local debt watcher Philippine Ratings Services Corp. (Philratings) said it maintained the PRS Aaa score to the bonds of San Miguel Brewery Inc. (SMB) amid higher excise taxes for alcoholic beverages.

“Obligations rated PRS Aaa are of the highest quality with minimal credit risk. The obligor’s capacity to meet its financial commitment on the obligation is extremely strong,” Philratings said.

Philratings said the credit rating reflects SMB’s high cash flow and profitability, sustained financial flexibility, adequate capitalization; dominant domestic market position, experienced management team and robust consumer spending.

The PRS Aaa scores were assigned to P22.4-billion Series B bonds maturing in 2014, P2.81-billion Series C maturing in 2019, P3-billion Series D maturing in 2017, P10-billion Series E maturing in 2019 and P7-billion Series F maturing in 2022.

“The rating also considered changes in the tax regime on alcoholic beverages implemented last January,” Philratings said.

Republic Act No. 10351 or the Sin Tax Law imposed higher excise tax on tobacco and alcohol products, with the government aiming to shore up its revenues while discouraging heavy consumption of cigarettes, beer, liquor, wine, and other tobacco and alcohol products.

“This effect, however, is in time reversed as consumers adjust to the new normal prices for beer,” the credit rater said, adding that higher prices initially dampen demand.

SMB, which partnered with Japan’s top beer producer Kirin Brewery Co., corners 96.8 percent of the local beer industry as of end-2012.