Reuters logo
6 months ago
Fitch: Thai Food Retailers to Focus on Profit, Target Markets
February 9, 2017 / 6:41 AM / 6 months ago

Fitch: Thai Food Retailers to Focus on Profit, Target Markets

(The following statement was released by the rating agency) BANGKOK, February 09 (Fitch) The margins of the three main large-format food retailers in Thailand are likely to improve this year as they focus on profitability and rein in competition on sales volume, Fitch Ratings says. The key players, two of which are now owned by large local conglomerates, are likely to tap links with their parents in terms of network, product sourcing and logistics to enhance product offerings to their target customers and improve cost management. The profit margins of both Siam Makro Public Company Limited (Makro, A(tha)/Stable) and Big C Supercenter Public Company Limited (Big C) improved in 3Q16 from the preceding quarter after several quarters of weakness. This was likely driven by changes in strategy to focus on profitability instead of competing for sales volume. Fitch expects this trend to continue in 2017. The competition for sales volume has eased since June 2016, when Big C shifted away from big discount campaigns to attract large volume buyers and moved towards sales with healthier margins by focusing more on its target of retail consumers. This move by Big C should benefit Makro, which targets large-volume buyers, including traditional food retailers, hotels, restaurants and catering operators. This is in contrast to Big C and Tesco Lotus, which appeal to end-consumers. Makro has also adjusted its strategy given continued weakness in sales to traditional retailers in 3Q16, and it has expanded its product offerings to hotels, restaurants and caterers, which has enhanced both sales and profitability. An expected gradual recovery in purchasing power in 2017 should also support the Thai food retailers. The Fiscal Policy Office of the Ministry of Finance forecasts private consumption to grow at 3.0% in 2017, supported by rising agriculture prices and the country's economic growth, which it forecasts at 3.6%. In addition, the large number of consumers who purchased cars in 2011, when there was a tax rebate for first-car buyers, would have mostly paid up their car loans in 2016, which could help to free up their budgets for other purchases this year. Fitch expects Big C to continue focusing on improving profitability in 2017 through synergies with its new major shareholder, Berli Jucker Public Company Limited (BJC), which is a leading manufacturer of consumer goods in Thailand. According to Big C, it expects to integrate its logistics operations across the entire value chain after the acquisition, use BJC's manufacturing capability for its private brands, and cross-sell BJC products in Big C's distribution network. These synergies should lead to more cost efficiency and consequently, higher profitability. Makro and its major shareholder, CP ALL Public Company Limited (A(tha)/Stable) - both of which are leading food retailers in Thailand - have reaped the benefits of better bargaining power against their suppliers and logistics management. This was reflected in the improved margins of both entities in 2014-2015, amid a weak domestic economy. Fitch expects Makro to generate higher EBITDAR margin and stronger operating cash flow in 2017. However, Makro's free cash flow and financial leverage over the next two to three years could be pressured as it has started to execute its regional expansion plan. Makro's FFO-adjusted net leverage was 1.7x at end-September 2016, which offers the company moderate rating headroom for additional investments. Contact: Somruedee Chaiworarat Director +66 2108 0160 Fitch Ratings (Thailand) Limited Level 17, Park Ventures, 57 Wireless Road, Lumpini, Patumwan, Bangkok 10330 Nichaya Seamanontaprinya Associate Director +66 2108 0161 Vicky Melbourne Senior Director +612 8256 0325 Media Relations: Leslie Tan, Singapore, Tel: +65 67 96 7234, Email: leslie.tan@fitchratings.com. Additional information is available on www.fitchratings.com. ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEB SITE AT WWW.FITCHRATINGS.COM. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE, AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE CODE OF CONDUCT SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE. Copyright © 2017 by Fitch Ratings, Inc., Fitch Ratings Ltd. and its subsidiaries. 33 Whitehall Street, NY, NY 10004. Telephone: 1-800-753-4824, (212) 908-0500. Fax: (212) 480-4435. Reproduction or retransmission in whole or in part is prohibited except by permission. All rights reserved. In issuing and maintaining its ratings and in making other reports (including forecast information), Fitch relies on factual information it receives from issuers and underwriters and from other sources Fitch believes to be credible. Fitch conducts a reasonable investigation of the factual information relied upon by it in accordance with its ratings methodology, and obtains reasonable verification of that information from independent sources, to the extent such sources are available for a given security or in a given jurisdiction. The manner of Fitch’s factual investigation and the scope of the third-party verification it obtains will vary depending on the nature of the rated security and its issuer, the requirements and practices in the jurisdiction in which the rated security is offered and sold and/or the issuer is located, the availability and nature of relevant public information, access to the management of the issuer and its advisers, the availability of pre-existing third-party verifications such as audit reports, agreed-upon procedures letters, appraisals, actuarial reports, engineering reports, legal opinions and other reports provided by third parties, the availability of independent and competent third- party verification sources with respect to the particular security or in the particular jurisdiction of the issuer, and a variety of other factors. Users of Fitch’s ratings and reports should understand that neither an enhanced factual investigation nor any third-party verification can ensure that all of the information Fitch relies on in connection with a rating or a report will be accurate and complete. Ultimately, the issuer and its advisers are responsible for the accuracy of the information they provide to Fitch and to the market in offering documents and other reports. In issuing its ratings and its reports, Fitch must rely on the work of experts, including independent auditors with respect to financial statements and attorneys with respect to legal and tax matters. Further, ratings and forecasts of financial and other information are inherently forward-looking and embody assumptions and predictions about future events that by their nature cannot be verified as facts. As a result, despite any verification of current facts, ratings and forecasts can be affected by future events or conditions that were not anticipated at the time a rating or forecast was issued or affirmed. The information in this report is provided “as is” without any representation or warranty of any kind, and Fitch does not represent or warrant that the report or any of its contents will meet any of the requirements of a recipient of the report. A Fitch rating is an opinion as to the creditworthiness of a security. This opinion and reports made by Fitch are based on established criteria and methodologies that Fitch is continuously evaluating and updating. Therefore, ratings and reports are the collective work product of Fitch and no individual, or group of individuals, is solely responsible for a rating or a report. The rating does not address the risk of loss due to risks other than credit risk, unless such risk is specifically mentioned. Fitch is not engaged in the offer or sale of any security. All Fitch reports have shared authorship. Individuals identified in a Fitch report were involved in, but are not solely responsible for, the opinions stated therein. The individuals are named for contact purposes only. A report providing a Fitch rating is neither a prospectus nor a substitute for the information assembled, verified and presented to investors by the issuer and its agents in connection with the sale of the securities. Ratings may be changed or withdrawn at any time for any reason in the sole discretion of Fitch. Fitch does not provide investment advice of any sort. Ratings are not a recommendation to buy, sell, or hold any security. Ratings do not comment on the adequacy of market price, the suitability of any security for a particular investor, or the tax-exempt nature or taxability of payments made in respect to any security. Fitch receives fees from issuers, insurers, guarantors, other obligors, and underwriters for rating securities. Such fees generally vary from US$1,000 to US$750,000 (or the applicable currency equivalent) per issue. In certain cases, Fitch will rate all or a number of issues issued by a particular issuer, or insured or guaranteed by a particular insurer or guarantor, for a single annual fee. Such fees are expected to vary from US$10,000 to US$1,500,000 (or the applicable currency equivalent). The assignment, publication, or dissemination of a rating by Fitch shall not constitute a consent by Fitch to use its name as an expert in connection with any registration statement filed under the United States securities laws, the Financial Services and Markets Act of 2000 of the United Kingdom, or the securities laws of any particular jurisdiction. Due to the relative efficiency of electronic publishing and distribution, Fitch research may be available to electronic subscribers up to three days earlier than to print subscribers. For Australia, New Zealand, Taiwan and South Korea only: Fitch Australia Pty Ltd holds an Australian financial services license (AFS license no. 337123) which authorizes it to provide credit ratings to wholesale clients only. Credit ratings information published by Fitch is not intended to be used by persons who are retail clients within the meaning of the Corporations Act 2001

0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below