Fitch assign BBB rating to Berlina

Fitch Ratings has today assigned Indonesia's PT Berlina Tbk a national long-term rating of BBB(idn). The Outlook is Stable. The agency has also assigned ratings of BBB(idn) to its existing series B rupiah bonds and Islamic rupiah bond totalling IDR117bn, due on 15 December 2009.
Berlina's rating reflects its experience in Indonesia's plastic packaging industry and improving credit metrics over the last two years. Supported by strong demand growth from major consumer goods companies in Indonesia and China, Berlina's revenue grew by more than 20% during FY07-FY08.
Berlina's financial leverage, as measured by adjusted net debt to EBITDAR, improved to 1.4x in FY08 from a peak of 3.0x in 2006, while its EBITDA/gross interest coverage rose to 3.8x in FY08 from a low of 1.9x in FY06.
The rating is also supported by Berlina's good liquidity position as reflected by its ability to redeem its rupiah bonds at maturity from its cash position of IDR65.5bn at end-June 2009 and a committed undrawn long-term loan facility of IDR117bn from PT Bank CIMB Niaga Tbk. Fitch notes that while Berlina's interest coverage ratio may weaken in the short-term due to higher borrowing costs, it will remain acceptable for its rating category.
The rating is constrained by the company's small scale with EBITDA of IDR71bn in FY08, as well as by the nature of the industry that requires continuous capex programme to boost sales. Berlina plans an aggressive capex programme totalling IDR228bn over 2009-2013. In Fitch's opinion, this expansion plan could weaken the company's credit metrics in the short-to medium-term. However, Fitch acknowledges that some portion of this capex could be deferred if necessary.
The rating is also constrained by Berlina's high customer concentration with Unilever Indonesia and Unilever China accounting for about 54% and 14%, respectively, of its consolidated revenue in the first half of 2009. This risk is partly mitigated by the long-term relationship these companies have with Berlina (since the 1970s), though there is no off-take agreement. Furthermore, the inherent risk of fluctuating raw material prices continues to put pressure on cash flow generation.
The Stable Outlook reflects the agency's expectation that Berlina's operating performance will continue to support its credit profile with an adjusted net debt to EBITDAR leverage ratio below 2x. However, a negative rating action may be taken if the company's financial profile deteriorates to a point that adjusted net debt to EBITDAR ratio exceeds 2x, and/or its EBITDA/gross interest expense falls below 3x on sustainable basis. A positive rating action is not envisaged in the next two years given that the small operations are a factor that cannot be addressed in the short-term.
Established in 1969, Berlina engages in the manufacturing of rigid plastic packaging and toothbrushes mainly for the cosmetic, pharmaceutical, personal care and F&B industries. In the first six months ending June 2009, Berlina recorded revenue of IDR245.7bn and EBITDA of IDR38.2bn.