Fitch Ratings Indonesia has revised consumer food and beverage manufacturer
At the same time, Fitch has withdrawn all the ratings.
The Outlook revision reflects Fitch's expectation that Mayora's EBITDA margin will be sustained above 10%, with low EBITDA net leverage of less than 1.0x in 2023 and 2024. Mayora's rating is also supported by its strong brands, robust market position, and diverse portfolio.
'AA' National Ratings denote expectations of a very low level of default risk relative to other issuers or obligations in the same country or monetary union. The default risk inherent differs only slightly from that of the country's highest rated issuers or obligations.
Fitch Ratings Indonesia has chosen to withdraw the ratings on Mayora for commercial reasons.
Key Rating Drivers
Recovery in Margin: Fitch estimates Mayora's EBITDA margin to return to above 12% in 2023 and 2024, after falling as low as 9%-10% in 2021-2022 due to higher raw material prices. The company's stronger EBITDA margin will be supported by its ability to adjust prices as one of the market leaders. It is also supported by its ability to cut back on advertising and promotion (A&P) expenses without materially hurting its sales. Mayora's EBITDA margin improved to above 15% in 1Q23 on normalising raw material prices and lower A&P spending.
High Commodity Exposures: Mayora's profitability is subject to fluctuations in the prices of its main raw materials. Its manufacturing cost is driven by raw material and packaging costs, which together accounted for about 80% of total costs in the past three years. Mayora's raw materials include wheat, sugar, coffee and palm oil derivatives, of which around 30% are imported. However, this is mitigated by Mayora's export revenue.
Strong Brands to Support Growth: Fitch believes Mayora's strong brands, as it is the market leader in several product segment, will continue support its position in
Conservative Leverage Despite Expansion: Mayora is developing two new biscuit and wafer factories in Balaraja and Purwosari that will increase production capacity by 200,000 tonnes per year, or 30%. We expect capex to rise to above
Geographical and Product Diversifications: Mayora generates around 40% of its sales from exports. The company exports its products to over 90 countries, such as
Derivation Summary
Mayora is rated at the same level as
Mayora's National Rating is one notch lower than that on
Key Assumptions
Revenue to grow by more than 5% a year in 2023-2024.
EBITDA margin of above 12% in 2023-2024 (2022: 10.7%)
Capex of above
Dividend pay-out ratio of 40%, in line with the historical level
RATING SENSITIVITIES
No longer relevant as the ratings are being withdrawn.
Liquidity and Debt Structure
Ample Liquidity; Solid Funding Access: At
Issuer Profile
Mayora is among the largest packaged-food companies in
Summary of Financial Adjustments
Fitch has added back the unamortised debt issuance cost to reflect the actual principal repayment at maturity.
Fitch has reclassified interest income from cash flow from investing activities to cash flow from operating activities.
Sources of Information
The principal sources of information used in the analysis are described in the applicable criteria.
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING
The principal sources of information used in the analysis are described in the Applicable Criteria.
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