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Announcement:

Moody's: Jardine's modest 2012 results can be contained within the A3 rating

13 Mar 2013

Hong Kong, March 13, 2013 -- Moody's Investors Service says 2012 results for Jardine Matheson Holdings ("JMH") and Jardine Strategic Holdings ("JSH") were modest, though overall financial metrics remain strong for JSH's A3 issuer rating with a stable outlook.

JSH and JMH are co-holding companies of Jardine Group.

"Jardine's overall business performance in 2012 continued to improve however growth rates are slowing and segmental results are mixed," says Laura Acres, a Moody's Senior Vice President.

Despite a moderate set of results, Jardine Group's credit metrics remain strong with low leverage and strong interest coverage. At end-2012, Jardine maintains a strong credit profile for its A3 rating level. The adjusted funds from operations ("FFO")/net debt—which include adjustments for operating leases and unfunded pension liabilities, but exclude debt from financial services--equaled to about 57% - down from 2011 but still strong for the rating level. Adjusted FFO interest coverage—which include operating lease adjustments but exclude fair value gain of investment properties—equaled to about 11x -- broadly similar to 2011.

Jardine Group's total revenue--excluding associates—reached USD 39.6 billion in 2012, up 4.3% y-o-y, with key contributors such as Astra and Dairy Farm recording strong sales growth of 7.5% and 7.3% respectively, although growth rates have tailed off substantially since FY 2011. Astra, which continued to be the largest contributor to Jardine Group based on revenue, generated over USD 20.0 billion in sales -- a record-high -- although this was adversely impacted by the depreciation of the Rupiah against the US-dollar.

Bucking the trend was Hongkong Land (rated A2 stable), which experienced a y-o-y decline of 8.9% in sales due to the lower number of residential properties completed during the H1 2012 period. This was not unexpected as the company enjoyed record residential property sales in each of the past 2 years. Moody's expects revenue from residential properties to markedly improve by 2013, when a large pipeline of properties in China and Singapore are scheduled for completion. In Hong Kong, the Central office portfolio saw positive rental reversions although the vacancy rate did increase to 3.4% from 3.1% at the H1 2012 stage and from 2.0% at year-end 2011.

Jardine Motors also reported a 5.3% decline in sales and a 70.5% decline in underlying profit due to difficult trading conditions and margin erosion in its Mainland China business. This business reported a loss which was countered by an improvement, albeit modest, in profits from Hong Kong and Macau and an increase in sales from the UK.

"Despite a year on year increase of 4.3% in top line sales, underlying profit before tax for 2012 was flat at USD4.7 billion due to declining margins" adds Acres. Weak performances by Jardine Motors and a one off charge at Dairy Farm were mainly responsible for the decline in the group's profit margins, with underlying profit before tax margin falling to 12.0% from 12.6% in 2011.

Jardine Group's liquidity also remains excellent with approximately USD4.0 billion of cash held at the non-financial services companies, more than sufficient to cover USD3.6 billion of debt maturing over the next 12 months.

JSH 's ratings were assigned by evaluating factors that Moody's considers relevant to the credit profile of the issuer, such as the company's (i) business risk and competitive position compared with others within the industry; (ii) capital structure and financial risk; (iii) projected performance over the near to intermediate term; and (iv) management's track record and tolerance for risk. Moody's compared these attributes against other issuers both within and outside JSH 's core industry and believes JSH 's ratings are comparable to those of other issuers with similar credit risk.

Other Factors used in this rating are described in Analytical Considerations in Assessing Conglomerates published in September 2007.

The Jardine Group, founded in 1832, has a broad portfolio of businesses across a number of Asian countries. It has a significant presence in engineering and construction, transport services, insurance broking, property investment and development, retailing, restaurants, luxury hotels, motor vehicles and related activities, financial services, heavy equipment, mining, and agribusiness.

Laura Acres
Senior Vice President
Corporate Finance Group
Moody's Investors Service Hong Kong Ltd.
24/F One Pacific Place
88 Queensway
Hong Kong
China (Hong Kong S.A.R.)
JOURNALISTS: (852) 3758 -1350
SUBSCRIBERS: (852) 3551-3077

Gary Lau
MD - Corporate Finance
Corporate Finance Group
JOURNALISTS: (852) 3758 -1350
SUBSCRIBERS: (852) 3551-3077

Releasing Office:
Moody's Investors Service Hong Kong Ltd.
24/F One Pacific Place
88 Queensway
Hong Kong
China (Hong Kong S.A.R.)
JOURNALISTS: (852) 3758 -1350
SUBSCRIBERS: (852) 3551-3077

Moody's: Jardine's modest 2012 results can be contained within the A3 rating
No Related Data.
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