Diversified conglomerate San Miguel Corporation has received the highest Issue Credit Rating of PRS Aaa from Philippine Rating Services Corporation (PhilRatings) for its planned P60 billion bond issuance.
PhilRatings said SMC is planning a bond issuance of P40 billion with an oversubscription of option of up to P20 billion. SMC earlier disclosed plans for a P60 billion issuance with an oversubscription option of P20 billion.
The ratings agency said it also maintained its Issue Credit Rating of PRS Aaa, with a Stable Outlook, for SMC’s P103.3 billion outstanding rated bonds.
Obligations rated PRS Aaa are of the highest quality with minimal credit risk and the obligor’s capacity to meet its financial commitment on the obligation is extremely strong. A Stable Outlook means the rating is likely to be maintained in the next 12 months.
PhilRatings said the assigned ratings and the corresponding Outlook took into account SMC’s diversified portfolio of market-leading businesses and its seasoned management team.
Also taken into consideration is SMC’s sustained profitability, driven by the continuous recovery of major businesses, albeit tempered by external headwinds; and its adequate liquidity, supported by stable cash flow generation.
PhilRatings said the businesses of SMC enjoy strong market positions, anchored on widely recognized brands with a solid track record.
Given the scale of its operations and the significance of its market position, aggregated sales of SMC’s businesses accounted for approximately 4.9 percent of the country’s Gross Domestic Product (GDP) in 2021.
SMC strongly recovered from the pandemic’s impact, ending the first six months of 2022 with consolidated sales of P711.4 billion.
This was higher by 73 percent year-on-year (YoY), driven by continuous volume growth and improved selling prices across all businesses.
Prevailing economic headwinds, however, adversely affected performance for the period. There was a marked increase in costs due to higher prices of fuel, coal products and select raw materials. Interest expense and other financing charges likewise rose, due to higher average interest rates.
In addition, SMC recognized materially higher foreign exchange and derivative losses as a result of the depreciation of the Philippine Peso against the US Dollar. The foregoing resulted in consolidated net income of P19.8 billion in the first half of 2022, lower by 33 percent YoY.
Nonetheless, cash flows of the Group remained positive for the period, and supporting a healthy liquidity position. As of end-June 2022, cash and cash equivalents stood at P302.9 billion.
Current ratio remained more than adequate at 1.2 times in the first half of 2022. Acid test ratio was likewise within acceptable levels at 0.8 times.