San Miguel Brewery retains top rating for P37-B bonds

MANILA, Philippines - Local credit watcher Philippine Rating Services Corp. has retained its sterling credit rating on the outstanding P37.81 billion bonds issued by San Miguel Brewery Inc.

Obligations rated triple A or “PRS Aaa,” the highest rating assigned by PhilRatings, are deemed of the highest quality with minimal credit risk. This means the issuer’s capacity to meet its financial commitment on the obligation is extremely strong.

In a statement, PhilRatings said the rating reflected SMB’s sustained track record of generating a significant amount of cash from operations, sustained financial flexibility and adequate capitalization, and strong market position domestically.

PhilRatings also considered SMB’s experienced management and production team with technical support from its partner Kirin Holdings.

SMB, the country’s leading brewer, has six production facilities. It also operates one brewery each in Hong Kong, Indonesia, Vietnam and Thailand and two breweries in China. It produces a lineup of well-known brands, which include: San Miguel Pale Pilsen, Red Horse Beer and San Mig Light. 

Its newer products, such as San Mig Zero and San Miguel Flavored Beer have also been well-received by consumers, demonstrating the company’s ability to anticipate and respond well to trends in the market. These brands are brought to retail outlets through an extensive and efficient distribution system. 

The major shareholders of SMB are San Miguel Corp. and Japan’s Kirin Holdings Co. Ltd. Kirin is a leading global food and beverage manufacturer since 1907 and its international exposure and experience further enhance SMB’s competitive position. 

PhilRatings said “SMB’s management team is well accustomed to the Philippine operating environment, having managed the company through periods of crisis and instability in the Philippines, as well as through changes in the excise tax regime for alcoholic beverages implemented in 2013.” 

SMB has been able to maintain its strong profit performance in the past two years with net income rising by 7.9 percent rom P12.52 billion in 2013 to P13.52 billion in 2014.

The company’s net cash generated from operations increased to P15.46 billion from P13.67 billion.

SMB’s debt to equity ratio also improved from 1.36 times to 0.98 times, affirming the company’s strong profit performance and good debt servicing capability.

Last April, SMB purchased the non-alcoholic beverage assets of Ginebra San Miguel Inc. in line with SMB’s plan of pursuing a multi-beverage strategy in the coming years. 

Some of the non-alcoholic beverage brands previously under GSMI which will now be distributed by SMB include: Magnolia Purewater, Magnolia Healthtea, Magnolia Fruit Drink and imported Berri Juice. PhilRatings will monitor SMB’s strategies in relation to this segment, as well as the results of these strategies, to assess this business’ effect on over-all company performance in the short- to medium-term.

 PhilRatings likewise assigned a rating outlook of stable to SMB’s credit rating.   A stable outlook is defined as “the rating is likely to be maintained or to remain unchanged in the next 12 months.