SMFB’s planned P15-B bonds gets top rating

SAN MIGUEL Food and Beverage, Inc.’s (SMFB) planned fixed-rate bonds worth up to P15 billion received the top credit rating from Philippine Rating Services Corp. (PhilRatings).

In a statement, PhilRatings said it assigned the bonds its highest issue credit rating of PRS Aaa with a stable outlook.

A PRS Aaa credit rating means these obligations are “of the highest quality with minimal credit risk.” A stable outlook means it is likely to be maintained within the next 12 months.

SMFB will be using the proceeds to redeem P15-billion worth of its Series 2 Preferred Shares in March 2020.

In assigning the credit rating, PhilRatings said it considered the company’s “strong brand equity and leading market position of SMFB’s core businesses.” It also cited the positive outlook for the Philippine economy, which will boost the food and beverage industry.

PhilRatings also noted SMFB’s “conservative financial position considering the capital intensive nature of its businesses; and its strong profitability performance and healthy cash flow generation.”

San Miguel Corp. (SMC) had consolidated its food and beverage businesses under SMFB in 2018. This includes San Miguel Pure Foods Company, Inc., San Miguel Brewery Inc. (SMB) and Ginebra San Miguel, Inc. (GSMI).

“As an SMC-owned company, SMFB realizes synergies from its relationship with the broader San Miguel Group. The size and scale of the broader San Miguel Group likewise provide the Company with significant leverage and bargaining power with suppliers,” PhilRatings said.

“Furthermore, the consolidation of SMC’s food and beverage business under SMFB resulted in economies of scale in infrastructure and unlocked greater shareholder value by creating a sizeable consumer vertical market under one company,” it added.

For the first nine months of 2019, SMFB reported its net income attributable to the parent dropped 8% to P12.65 billion, while consolidated sales jumped 10% to P226.36 billion.

In a regulatory filing, the company said it saw higher sales volume across all segments, but this was weighed down by the rising cost of raw materials and increased operating expenses due to expansion activities.