ASEAN KEY DESTINATIONS
Sritex gets Moody’s rating for first time
Ratings agency Moody’s Investors Service assigned Indonesian textile giant PT Sri Rejeki Isman (Sritex) its first ever rating.
It gave the firm a provisional corporate family rating (CFR) of (P)B1 with a stable outlook on Friday.
Moody’s also assigned a provisional (P)B1 rating on the proposed issuance of up to US$300 million senior unsecured notes due 2019 to be issued by Sritex’s wholly owned subsidiary, Golden Legacy Pte. Ltd.
The notes will be guaranteed by Sritex and its subsidiary guarantors.
Proceeds from the bond, according to Moody’s, will be used to refinance its existing debts of around $200 million, while the remainder will be used for working capital and general corporate purposes, such as to finance production capacity expansion.
According to Moody’s vice president and senior analyst Brian Grieser, the rating reflects Sritex’s relatively small scale in the global textile manufacturing industry, its geographic concentration of assets in Central Java, substantial capital spending plans and an exposure to volatile commodity input costs.
“On the other hand, the ratings are supported by Sritex’s ability to generate solid margins within a competitive and fragmented sector,” Grieser said in a statement published on Friday.
“Sritex benefits from its position as the largest fully integrated textile manufacturer in Indonesia and its low labor costs are relative to international competitors.”
The stable ratings outlook anticipates solid growth and stable profit margins over the next 12 to 24 months.
Moody’s expects each of Sritex’s businesses to grow, with the retail garment business contributing the highest to growth.
Moreover, capital investments are expected to exceed cash flows from operations over the next two to three years as Sritex intends to double its capacity by 2018.
According to Moody’s, Sritex’s ratings could be pushed down if “rising wagers and other input costs reduce its cost competitiveness, if the company expands its business through debt-funded acquisitions or capital expenditures or its liquidity deteriorates and is unable to fund growth initiatives with external funds”.
Sritex was founded in 1966 as a traditional trading company in a traditional market in Surakarta, Central Java, by Muhammad Lukminto.
The company, which produces military uniforms for the Indonesian Military (TNI) and NATO member countries, now employs 26,000 workers and operates nine spinning factories, three weaving factories and nine convection factories.
Sritex military uniform products have been marketed in more than 30 countries, including the UK, the US, Australia, Sweden, the Netherlands, Norway and Saudi Arabia.
Sritex also markets its fashion products to 40 countries and produces garments for foreign retailers, like American-based Walmart, Japan’s Uniqlo and Spanish retailer Zara.
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