SL Agritech Corporation (SLAC), a leading producer of hybrid rice seeds and premium rice in the Philippines, is planning to raise P4 billion through the issuance of commercial papers.
The firm was assigned an issuer credit rating of PRS Aa (corp.), with a Stable Outlook, by Philippine Rating Services Corporation (PhilRatings) in relation to the planned issuance.
The proceeds from the commercial paper issuance will be used to pay the Company’s short-term obligations and to purchase rice and seed inventories from its contract growers.
A company rated PRS Aa (corp.) differs from the highest-rated corporates only to a small degree, and has a strong capacity to meet its financial commitments relative to that of other Philippine corporates.
On the other hand, a Stable Outlook means the rating is likely to be maintained or to remain unchanged in the next 12 months.
In arriving at the rating, PhilRatings took into account SL Agritech’s competitive market position locally, supported by its proprietary technology and vertically integrated operations.
Also considered were the firm’s potential growth in the medium- to long-run given the Company’s international business expansion and SLAC’s sustained profitability, albeit generally declining profit margins and interest coverage ratios.
PhilRatings also noted the manageable impact of the COVID-19 pandemic, despite increasing economic uncertainty, as the Company’s products are considered essential.
The Company has taken steps to expand the production of its hybrid rice seeds in neighboring countries such as Myanmar, India and Indonesia, which are reportedly three of the world’s largest rice producers.
Operations abroad, however, were affected by restrictions imposed due to the COVID-19 pandemic.
PhilRatings notes that while the international business provides opportunities for growth, developments and progress in relation to this have been quite slow.
For the next two years, SLAC expects growth to continue, mainly driven by its domestic operations.
PhilRatings will continue to monitor the results of the Company’s international operations as developments in relation to these markets progress.
It should be noted that SLAC sold premium rice products at lower prices to accommodate the people affected by the pandemic during the last quarter of 2020.
PhilRatings notes that SLAC’s products are considered as essential. Although production and delivery were affected initially when the lockdown was first imposed, such are expected to not be restricted and can be managed, moving forward.
With the reduction in the prices of its rice products during this pandemic and its entry into non-premium rice, SLAC is expected to benefit from improved demand for its rice products as well.