International rating agency Fitch Ratings has affirmed Calik Group's (Calik) 'BBB(Tur)' Long-term National rating. The National rating reflects Calik Group's relative position within the country and is comparable only with National ratings of other Turkish companies as assigned by Fitch.
The rating also reflects Calik's restructuring attempts including the merger of GAP and GIP, its textile operating units in Turkey, in 2001; substantial hard currency revenues through geographically well diversified exports, particularly to the USA; and its strong customer base.
It also takes into consideration a relatively lower debt level when joint ventures in Turkmenistan are stripped out. The majority of Calik's debt is placed in these Turkmenistan JVs, which benefit from explicit Turkmenistan government guarantees—78 percent of consolidated $185.4 million debt as of FY02 on a proforma basis.
The moderate leverage measures are demonstrated by 0.50x net debt to EBITDA and 1.12X gross debt to EBITDA (Earnings Before Interest, Tax, Depreciation and Amortization) ratios when they are stripped out.
Despite these positive factors the ratings are somewhat limited by the volatile global cotton prices, combined with competitive pricing pressures in international markets as demonstrated in Calik's volatile textile business EBITDA margins.
For example, GAP EBITDA margins during the past three years—FY00, FY01 and FY02—have been 18.3 percent, 37 percent and 17.8 percent respectively. Furthermore, ongoing consolidations within the group prevent a sound basis for comparable data.
Calik's operational diversification attempts continued in 2001 and 2002 through its energy business, in addition to a construction business, the majority of which is based in Turkmenistan. The group's ratings are somewhat constrained by the economic risks associated with the location of its Turkmenistan businesses.
Despite these continued diversification attempts, textiles still account for the majority of the group's business. The agency will monitor any change in terms of possible expansion into other countries for the construction and energy businesses.
The assigned ratings reflect the limited defined upstream of dividends within the group due to full consolidation of the Turkmenistan JVs. The agency takes into consideration the insignificant cash and debt levels at the holding company, the existence of cross guarantees between the group companies and location of the debt within the group.
Calik Holding produces a wide range of cotton-based textiles, ranging from yarn (ring, open end) to denim fabric, ready wear and home textile products. It has interests at home and abroad through its key operating units in Malatya (Turkey) and the aforesaid JVs in Turkmenistan.
Ahmet Calik is the controlling shareholder of the group, which generated $603.7 million consolidated turnover and $94.3 million EBITDA in FY02 on a profoma basis. — (menareport.com)
© 2003 Mena Report (www.menareport.com)
