Fitch Ratings Lanka upgrades Abans to A(lka)

Fitch Ratings Lanka has upgraded Aban’s National Long-Term Rating to A(lka) from A-(lka).

Following the upgrade, Outlook on the rating is ‘Stable’.

When upgrading Aban’s rating the agency has taken into account the notable improvements that Abans have initiated to its Management Information Systems, in terms of integration and internal reporting aspects, as well as internal controls. Fitch believes that such improvements will help Abans monitor their performance of its various divisions, including management of working-capital across its large base of outlets as well as consumer loan-book. Further, the management’s strategy to limit growth of its consumer-financing operation is viewed positively, given the current economic environment.

In their report, Fitch have noted that ‘Despite the high inflationary pressure on consumer spending, Abans sales have been robust.’ However, Fitch does not expect Abans to maintain historic levels of growth over the medium term given the weakening macro-economic environment, which they think will not materially improve for sometime. Nevertheless, the upgrade reflect their view that Abans will continue to report consistent growth in revenues and earnings, leveraging on its strong product/brand offering, growing retail network, and, to some extent, help from its consumer financing operation. Fitch have also noted with interest Abans overall gross profit margins and sustained profitability across most product segments.

The other positive factors that Fitch have taken into account when upgrading Aban’s Rating, is the improved revenue related diversity in terms of product, brand and geographic distribution of sales and the increasing domestic sourcing resulting in lower costs, allowing it to be more price competitive, while also facilitating better management of inventory.