Ratings agency RAM has given corporate credit ratings of "AA-," with stable outlook, for the long term, and "P1," for the short term, to Sri Lankan diversified conglomerate Hayleys, stating that these ratings are indicative of its "diversified business portfolio, strong market positions in several key businesses and adequate debt-protection metrics."
RAM also noted that the ratings were "moderated by the group’s high debt levels, fragile liquidity and a few loss-making operations.
The ratings are further pressured by Hayleys’ exposure to volatile commodity prices and foreign-exchange risk." Hayleys MGT Knitting Mills PLC, the group's textile business, was also highlighted as one of the loss making operations in question.
Additionally, RAM also pointed out that issues it had identified within the group were "somewhat mitigated given a certain level of natural hedging in the group’s business operations, which has been achieved through vertical integration and diversification. " These concerns were identified by RAM as being centred "primarily on the group’s high debt burden and liquidity position.
In recent years, Hayleys has pursued debt-funded acquisitions, which had increased its debt from Rs. 11.37 billion as at end-March 2009 to Rs. 19.25 billion as at end-September 2011, with a corresponding gearing ratio of 0.69 times. Meanwhile, Hayleys’ liquidity position has been weak in recent times.
Short-term debts accounted for some 72% of the group’s borrowings whereas the ratio of its cash and cash equivalents to short-term debts only came up to 0.12 times as at end-March 2011." |
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