MOODY'S ASSIGNS A2 RATING TO AJINOMOTO CO., INC.'S SENIOR UNSECURED LONG-TERM DEBT, AND REVIEWS SHORT-TERM DEBT RATING FOR POSSIBLE UPGRADE
Tokyo, 10-09-97 -- Moody's Investors Service assigned A2 ratings to the senior unsecured long-term debt and shelf registration of Ajinomoto Co., Inc. (Ajinomoto) and to the US$300 million Euro medium-term note program of Ajinomoto and Ajinomoto Capital (Europe) B.V. (Ajinomoto Capital). The notes issued by Ajinomoto Capital are supported by a keep well agreement and a deed poll between Ajinomoto and Ajinomoto Capital. At the same time, Moody's placed its Prime-2 rating of Ajinomoto U.S.A. Inc.'s U.S. commercial paper program, guaranteed by Ajinomoto, under review for possible upgrade. The A2 rating and rating review for short-term debt reflect Ajinomoto's established market position in the domestic food industry, the strong earnings contribution from its growing fine chemical sector, and substantial financial flexibility. The rating action also incorporates the domestic food market's challenging environment, Ajinomoto's weaker profitability in the food sector compared with that of its peers, and the unlikeliness of substantial improvement in debt-protection measures over the intermediate term. Moody's review of the short-term rating will examine the appropriate level of alternate liquidity for the commercial paper issued by Ajinomoto U.S.A. Inc. This is the first time that Moody's has rated the long-term debt of this company.
The A2 ratings were assigned to:
Ajinomoto Co., Inc.--
Yen 15 billion 2.675% domestic bonds, due 2007;
Yen 10 billion 2.425% domestic bonds, due 2005;
Yen 15 billion 2.075% domestic bonds, due 2003;
Yen 10 billion 1.600% domestic bonds, due 2001;
Yen 70 billion domestic shelf registration.
Ajinomoto and Ajinomoto Capital --
US$300 million Euro medium term note program.
According to Moody's, Ajinomoto is one of Japan's leading food manufacturers. It started as a monosodium glutamate (MSG) producer, and has maintained a dominant market share in MSG and related composite seasonings and flavorings. The company has aggressively expanded its food products line into edible oils, frozen foods, beverages, and dairy products. It has also successfully diversified its businesses into non-food sectors mainly through amino acid based products and specialty chemicals. In addition, the company has accelerated its diversification through strategic alliances with major foreign food and chemical companies. Ajinomoto is a pioneer of global operations among Japanese companies in the food business. It has successfully managed geographical expansion, and has accumulated expertise in overseas operations.
In Moody's view, Ajinomoto will be able to maintain its leading position in the domestic food market over the intermediate term, given its established brands; strong presence in diverse food products; and high ability to introduce new products, including strategic tie-ins with foreign companies. However, domestic food producers have been facing such challenges as limited growth potential of products, intense competition and constant pricing pressure. Ajinomoto's profitability in the food sector has been historically lower than that of its peer group, attributable mainly to a lower margin products mix and a secondary position in its major food products. Nevertheless, Ajinomoto will likely sustain its growth and profitability, mainly through the non-food sector, with higher margins, growth potential and business expansion in the overseas market. It is expected that the company will maintain investment and capital expenditure at a certain level, especially in overseas market, to meet the growing demand for MSG, amino acids and feed-use amino acids, mainly in developing countries, and to enhance production at cheaper cost. As such, improvement in debt coverage and capital structure will be somewhat limited, while unrealized gains in the company's securities holdings should add financial flexibility.
Ajinomoto Co., Inc., headquartered in Tokyo, is one of the largest food processors in Japan. Its consolidated sales for the fiscal year ended March 31, 1997 were Yen 788.4 billion. Overseas sales represented 18.7% of total sales in the same period. Ajinomoto Capital (Europe) B.V., headquartered in Amsterdam, is a wholly-owned overseas finance subsidiary of Ajinomoto Co., Inc. Ajinomoto U.S.A. Inc., headquartered in New Jersey and a wholly owned subsidiary of Ajinomoto Co., Inc., manufactures and sells monosodium glutamate and pharmaceutical-use amino acids.
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