Diversified conglomerate San Miguel Corporation has received the highest issue credit rating of PRS Aaa from Philippine Rating Services Corporation (PhilRatings) for its planned P60 billion bond issue.
PhilRatings said SMC is planning a 40 billion peso bond issue with an oversubscription of options of up to 20 billion pesos. SMC previously disclosed plans for a 60 billion peso issue with a 20 billion peso oversubscription option.
The rating agency said it also maintained its issue credit rating of PRS Aaa, with a stable outlook, for SMC’s outstanding rated bonds of 103.3 billion pesos.
Obligations rated PRS Aaa are of the highest quality with minimal credit risk and the obligor’s ability to meet its financial commitment on the obligation is extremely strong. A stable outlook means that the rating is likely to be maintained over the next 12 months.
PhilRatings said the assigned ratings and corresponding outlook took into account SMC’s diverse portfolio of market-leading companies and its seasoned management team.
SMC’s sustained profitability, driven by the continued recovery of large companies, albeit tempered by external headwinds, is also taken into account; and its adequate liquidity, supported by stable cash flow generation.
PhilRatings said SMC’s business enjoys strong market positions anchored on widely recognized brands with a strong track record.
Given the scale of its operations and the importance of its market position, the aggregate sales of SMC’s business accounted for approximately 4.9% of the country’s gross domestic product (GDP) in 2021.
SMC has recovered strongly from the impact of the pandemic, closing the first six months of 2022 with consolidated sales of 711.4 billion pesos.
This figure was up 73% year-on-year (YoY), driven by continued volume growth and improved selling prices across all businesses.
However, prevailing economic headwinds hurt performance for the period. There was a marked increase in costs due to higher prices for fuel, coal products and certain raw materials. Interest expense and other financing costs also increased due to higher average interest rates.
In addition, SMC recorded significantly higher foreign exchange and derivative losses due to the depreciation of the Philippine peso against the US dollar. The above translated into a consolidated net profit of 19.8 billion pesos in the first half of 2022, down 33% year-on-year.
Nevertheless, the Group’s cash flow remained positive over the period and supports a healthy liquidity position. At the end of June 2022, cash and cash equivalents amounted to 302.9 billion pesos.
The current ratio remained more than adequate at 1.2 times in the first half of 2022. The acid test ratio was also within acceptable levels at 0.8 times.
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