Fitch Ratings has affirmed Turkish brewer Anadolu Efes' foreign currency and local currency Senior Unsecured ratings at B and BB respectively. The Outlook is Positive for the foreign currency rating and Stable for the local currency rating, according to a press release.
The ratings reflect Efes' strong position in the Turkish market. After the unsuccessful attempt by its main competitor, Turk Tuborg, to gain market share in 2002, Efes' operating margins recovered in 2003 and are expected to be higher than the pre-2001 crisis level at c.25 percent.
Turkey's per capita beer consumption is still very low at 11 liters per year and leaves room for long-term demand growth. The Turkish economy remains fragile but Efes' operations proved resilient in the exceptionally tough 2001 environment. Efes' 33 percent stake in associate company Coca Cola Icecek, offers synergies in distribution.
Efes Breweries International (EBI), the holding company for the group's brewing operations outside of Turkey, mainly Russia, has been growing fast. EBI has reached good market positions in Moscow and is now expanding in the south west of the country. It has put the emphasis in the premium segment with the Stary Melnik brand and is particularly strong in the Moscow region, where it achieved number two position in value terms, just behind the market leader, BBH. However, the Russian market is far from settled and is now becoming increasingly competitive. It may take several years before brand loyalty is built.
EBI is still in an expansion phase, which necessitates financing of significant capex and marketing efforts. Because of EBI's separate funding, Fitch analyses Efes' capacity to service its unsecured debt without the contribution of EBI. Fitch also includes in Efes' debt a contingent liability linked to a put option of private investors in EBI should no IPO of the latter take place by third quarter 2004. EBI's creditors have no other recourse to Efes.
Without the contribution of EBI but adding EBI's contingent liability to the debt, Efes' gross leverage stands at about 2.2x. The gross interest cover looks comfortable at c.8.0x for FY02. With the strong recovery in margins over the year, the strength of the TRL and the forecasted reduction in Efes' debt, leverage is expected to decrease below 1.0x as at YE03. — (menareport.com)
© 2004 Mena Report (www.menareport.com)
