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Aug 27 (Reuters) - (The following statement was released by the rating agency)
Fitch Ratings has affirmedRating Long-Term Foreign Currency and Local Currency Issuer DefaultRatings (IDRs) Wisesa PT Fajar Surya Tbk (Fajar) at ‘B +'. At the time of the Simultaneously, the National Long-term rating affirmed at ‘A (idn)'. prospect is stable.
Rating takes into account the position of the Dawn as the largest producer of paper packaging both in Indonesia and steady demand for its products, where 70% of sales come from fast moving consumer goods. also ranked reflect underlying capital expenditure intensity operations, and potential increase in the ratio of debt to be at the top while the ratio of the reference Fitch downgrades over the next two years. This is due to by the possibility of investing in a new paper machine (PM-8)
Initiator Level Factors
Debt ratios are high: PM-8 expansion could increase debt ratio Dawn as measured by net debt / EBITDA ratio is above the reference downgrade at 3.5x in 2014 draft 2015. However, Fitch believes that this a temporary condition due to PM-8 would negate the need for increased significant capacity until 2018-2019. Dawn debt ratio increases to 4.75x in 2012 due to the cessation of operation of a paper machine for capacity expansion in H112. Debt ratio improved to 2.63x in H113.
Capital Expenditure intensity: PM-8 expansion is estimated to cost U.S. $ 150 million and is expected to increase production capacity to 1.55juta MT in 2015 from the current capacity of 1.2juta MT. PM-8 should provide sufficient capacity until 2018-2019 before companies are required to re- add capacity to maintain market share in the packaging sector in Indonesia is continuing to grow.
Strong market position: Dawn Fitch believes the ability to determine price allows the company to charge most of the increase in costs raw materials. Dawn, along with its closest competitor, PT Indah Kiat Pulp & Paper Tbk, each hold a 30% market share of the market in packaging paper Indonesia. Sales of packaging paper reaches over 80% of total sales Dawn.
Sufficient liquidity: Dawn Fitch expects cash reserves, facilities Unused borrowing, access to bank financing and the acquisition of strong cash internal debt will be sufficient to pay the company’s long-term due. Fitch also believes the company will be able to obtain a loan long-term enough to finance the expansion of PM-8. In late June 2013, Dawn has IDR130milyar cash reserves, cash flow from operations annualized range in USD 900milyar and around £ 1trilyun facilities Unused borrowing compared to the long-term debt falling tempo of £ 500milyar up to £ 650milyar per year within two up to three years.
Negative: future developments that individually and collectively can lower levels of other anatar:
- The increase in the debt ratio above 3.5x on an ongoing basis
- Weakening interest expense adequacy ratio (EBITDA / interest) to be less than 3.0x (6.8x in H112)
- The weakening liquidity profile due to large expansion funded by debt with shorter durations.
Positive: future developments that individually and collectively can raise levels:
- Fitch ratings do not predict an increase in the medium term given the high capital expenditure in the company’s operations.