SL Agritech Corporation (SLAC), a leading producer of hybrid rice seeds and premium rice in the Philippines, is planning to raise up to P4 billion from the issuance of commercial papers.
In relation to the planned issuance, SL Agritech was assigned an issuer credit rating of PRS Aa (corp.), with a Stable Outlook, by Philippine Rating Services Corporation (PhilRatings).
The proceeds from the CP issuance will be used to pay the Company’s short-term obligations, and to purchase rice and seed inventories from its contract growers.
A company rated PRS Aa (corp.) differs from the highest-rated corporates only to a small degree, and has a strong capacity to meet its financial commitments relative to that of other Philippine corporates.
A Stable Outlook means the rating is likely to be maintained or to remain unchanged in the next 12 months.
In arriving at the rating, PhilRatings took into account SLAC’s competitive market position locally, supported by proprietary technology and vertically integrated operations.
It also considered the firm’s potential growth in the medium- to long-run given the Company’s international business expansion and its shareholder commitment and experienced management team.
Philratings also factored-in the Company’s sustained profitability in terms of absolute values, but margins have been generally declining, as well as the manageable impact of increasing economic uncertainty, as the Company’s products are considered as staples in the Philippines.
Although business generation remained largely domestically driven, SLAC continues to expand its network of customers abroad.
Its hybrid seeds are exported to Indonesia, Vietnam, Myanmar, Papua New Guinea and Bangladesh. Its rice products, on the other hand, are sent mainly to the Middle East and U.S.A.
In addition, the Company has taken steps to expand the production of its hybrid rice seeds in neighboring countries such as Myanmar, India and Indonesia.
The Company, however, is expecting delays in developing its international business as a result of the COVID-19 pandemic, political instability, high inflation rates, and the U.S. Federal Reserve’s aggressive interest rate hike, among others.
PhilRatings notes that while the international business provides opportunities for growth, developments and progress in relation to this have been quite slow.
Groundwork started in expanding the company’s international business may bear significant results only over the long-term.
Despite generally declining margins for the past years, SLAC’s profitability, in terms of absolute values, was on a generally increasing trend for the past eleven years.
Moving forward, SLAC expects growth to continue, mainly driven by both seeds and rice in the domestic market. Cost and operating expenses are seen to likewise increase, but at a slower pace.
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