Approximately USD10.7 billion of rated debt affected
Milan, June 24, 2015 -- Moody's Investor Service has today upgraded the long-term
senior unsecured rating of SABMiller plc (SABMiller) and the issuer rating
of Foster's Group Pty Limited to A3 from Baa1. The ratings of their
medium-term note programme (MTN) and the senior unsecured ratings
of their respective guaranteed subsidiaries were also upgraded respectively
to (P)A3 and A3. Concurrently, Moody's has also affirmed
SABMiller and its guaranteed subsidiaries P-2 short-term
ratings, and the national scale ratings of Aa3.za/P-1.za
assigned to SABSA Holdings limited. The outlook on all ratings
is stable.
"SABMiller's upgrade reflects the strong improvements in the group's
credit metrics during the financial year ending March 2015 and our belief
that this improvement will be sustainable over the medium to long term,
despite the company's ongoing appetite for potential medium to large
size acquisitions", says Paolo Leschiutta, a Moody's Vice
President -- Senior Credit Officer and lead analyst for
SABMiller. "During the financial year ending March 2015,
the company reduced its gross reported financial debt by 26%,
more than compensating for the negative impact of adverse currency movements
on reported profitability (reported EBITA was down 1%).
On a preliminary basis, SABMiller's financial leverage (debt
to EBITDA) and retained cash flow (RCF) to net debt (both Moody's
adjusted) stood respectively at 1.9x and at 28.5%,
well within the guidance we set for an upgrade when we changed the outlook
to positive in October last year", continued Mr. Leschiutta.
RATINGS RATIONALE
SABMiller's business and financial profiles have improved over the
last three years and since the acquisition of the Australian brewer Foster's
in 2011, the company has improved its geographic mix, increasing
the balance between emerging and developed markets. Despite a degree
of reliance on emerging markets (the group derives around 72% of
its annual EBITA from developing markets), the company has demonstrated
the ability to manage the volatility of these markets in terms of demand,
regulatory changes and foreign exchange rates movements. In addition,
Moody's recognizes the high medium-to-long term growth
potential offered by some of these markets and the diversification within
markets that have modest correlation in terms of economic growth.
The largest emerging markets for SABMiller include South Africa,
Colombia, Poland, the Czech Republic and Peru.
During FYE March 2015 a number of the company's emerging markets
grew organically and on a constant currency basis at around mid-to-high
single digit rates, which compensated for modest growth across Europe
(organic net revenues up by 2%) and North America (flat revenues).
Most of the growth, however, was owing to a strong performance
from the company's soft beverage business (mainly present in Africa
and Latin America), where volumes grew organically by 8%
at a group level, compared with flat volumes for beer during the
year. On a reported basis, both net produced revenues and
EBITA declined 2% and 1% respectively, negatively
affected by some currencies devaluation and a strong dollar (the reporting
currency of the group).
However, despite the soft trading performance on a USD reported
basis, the company succeeded in reducing its gross financial debt
from US$17 billion at March 2014 to around US$12.5
billion at March 2015. This was mainly achieved through a number
of non-recurring movements, including (1) approximately US$1.3
billion positive impact on currency exchange on the group's non
US dollar-denominated debt; (2) usage of around US$1.1
billion of existing cash on balance sheet; and (3) US$971
million of net proceeds from the July 2014 disposal of Tsogo Sun (the
hotel and gaming activities in South Africa). The balance of the
gross debt reduction was achieved through internally generated free cash
flow (around of US$1.7 billion after dividend payments),
which during the year also benefitted from the first dividend (since 1994)
from SABMiller's associate in China, CR Snow, for approximately
US$228 million. Despite the non-recurring nature
of some of these movements, Moody's believes that a substantial
part of the debt reduction is structural.
Moody's believes that SABMiller's appetite for medium to large
acquisition remains high, possibly higher than some of its peers.
Today's upgrade reflects the rating agency's expectation that
the company's business profile and prudent financial policy could
tolerate temporary weakness in key credit metrics as a result of M&A
activity. Nonetheless, Moody's expects that SABMiller
will maintain on an ongoing basis a Moody's-adjusted debt to EBITDA
below 2.5x and an RCF to net debt in the mid 20's in percentage
points terms. Moody's expects that the company will move
back within this range within 24 months from a large transaction,
thus preserving its new A3 rating.
SABMiller's ratings continue to reflect (1) the company's large
scale and diversity as the world's second largest brewing company
by volume, and third largest by revenues; (2) its international
footprint and increased geographic diversification; (3) a good track
record of integrating acquisitions and reducing leverage; and (4)
the company's strong margins and recurring cash flow from operations.
Moody's notes that the strong geographic diversification of SABMiller's
markets with no single geographic area accounting for more than 28%
of reported net revenues and 35% of reported EBITA (including associates)
compensates for the somewhat higher volatility of emerging economies.
In addition, the company's stable financial policy and solid
liquidity position supports Moody's expectation of continuing improvement
in key credits metric for the next 12-18 months. At the
same time, the ratings factor in the company's exposure to emerging
markets and the still-soft consumer environments in North America
and Western Europe.
RATIONALE FOR THE STABLE OUTLOOK
The stable outlook on SABMiller's A3 rating reflects Moody's expectation
that the group will (1) continue to manage its exposure to emerging markets
by reporting growing profitability; and (2) maintain credit metrics
in line with its rating on an ongoing basis, allowing for temporary
weakness (i.e., up to 24 months) in case of large
acquisitions.
WHAT COULD CHANGE THE RATING - UP/DOWN
Positive pressure on SABMiller's ratings could follow if the company demonstrated
its ability to maintain on an ongoing basis (1) financial leverage,
measured as debt/EBITDA (as adjusted by Moody's) around 2.0x;
and (2) retained cash flow (RCF) to net debt ratio in the high-20s.
Negative pressure on SABMiller's ratings and outlook could arise in case
of (1) a large debt-financed acquisition; (2) significant
increase in shareholders' return; or (3) sustained growth reduction
in key markets, leading to a prolonged deterioration in the company's
credit metrics, with financial leverage remaining significantly
above 2.5x and an EBITA margin (including its share of MillerCoors
profits) significantly below 25%.
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was Global Alcoholic Beverage
Industry published in October 2013. Please see the Credit Policy
page on www.moodys.com for a copy of this methodology.
Moody's National Scale Credit Ratings (NSRs) are intended as relative
measures of creditworthiness among debt issues and issuers within a country,
enabling market participants to better differentiate relative risks.
NSRs differ from Moody's global scale credit ratings in that they are
not globally comparable with the full universe of Moody's rated entities,
but only with NSRs for other rated debt issues and issuers within the
same country. NSRs are designated by a ".nn"
country modifier signifying the relevant country, as in ".za"
for South Africa. For further information on Moody's approach to
national scale credit ratings, please refer to Moody's Credit rating
Methodology published in June 2014 entitled "Mapping Moody's National
Scale Ratings to Global Scale Ratings".
List of affected ratings
Upgrades:
..Issuer: SABMiller Plc
....BACKED Senior Unsecured Regular Bond/Debenture,
Upgraded to A3 from Baa1
....Senior Unsecured Regular Bond/Debenture,
Upgraded to A3 from Baa1
....Senior Unsecured Medium-Term Note
Program, Upgraded to (P)A3 from (P)Baa1
..Issuer: SABMiller Holdings Inc
....BACKED Senior Unsecured Regular Bond/Debenture,
Upgraded to A3 from Baa1
....BACKED Senior Unsecured Medium-Term
Note Program, Upgraded to (P)A3 from (P)Baa1
..Issuer: Foster's Group Pty Limited
.... LT Issuer Rating, Upgraded to A3
from Baa1
..Issuer: FBG Finance Limited
....BACKED Senior Unsecured Regular Bond/Debenture,
Upgraded to A3 from Baa1
..Issuer: FGL Finance (Aust.) Limited
....BACKED Senior Unsecured Medium-Term
Note Program, Upgraded to (P)A3 from (P)Baa1
Affirmations:
..Issuer: SABMiller Plc
....BACKED Commercial Paper, Affirmed
P-2
....Other Short Term, Affirmed (P)P-2
..Issuer: SABMiller Holdings Inc
....BACKED Commercial Paper, Affirmed
P-2
..Issuer: SABSA Holdings Limited
....NSR BACKED Senior Unsecured Medium-Term
Note Program, Affirmed Aa3.za
....NSR BACKED Senior Unsecured Regular Bond/Debenture,
Affirmed Aa3.za
....NSR BACKED Other Short Term, Affirmed
P-1.za
..Issuer: FGL Finance (Aust.) Limited
....BACKED Other Short Term, Affirmed
(P)P-2
Outlook Actions:
..Issuer: SABMiller Plc
....Outlook, Changed To Stable From
Positive
..Issuer: SABMiller Holdings Inc
....Outlook, Changed To Stable From
Positive
..Issuer: SABSA Holdings Limited
....Outlook, Changed To Stable From
Positive
..Issuer: FBG Finance Limited
....Outlook, Changed To Stable From
Positive
..Issuer: FGL Finance (Aust.) Limited
....Outlook, Changed To Stable From
Positive
..Issuer: Foster's Group Pty Limited
....Outlook, Changed To Stable From
Positive
SABMiller Plc is the world's second-largest brewer by volume,
and the third largest by revenues, producing and distributing a
large variety of beer brands in approximately 75 countries. During
FY ending March 2015 and including the share of joint ventures and associates,
the company sold 246 million hectolitres of lager (broadly flat compared
to the prior year) and 70 million hectolitres of soft drinks (up 8%
organically during the year), for total revenue (before excise duties
and share of associates and joint ventures) of US$22.1 billion
(down 1% compared with the prior year).
REGULATORY DISCLOSURES
For ratings issued on a program, series or category/class of debt,
this announcement provides certain regulatory disclosures in relation
to each rating of a subsequently issued bond or note of the same series
or category/class of debt or pursuant to a program for which the ratings
are derived exclusively from existing ratings in accordance with Moody's
rating practices. For ratings issued on a support provider,
this announcement provides certain regulatory disclosures in relation
to the rating action on the support provider and in relation to each particular
rating action for securities that derive their credit ratings from the
support provider's credit rating. For provisional ratings,
this announcement provides certain regulatory disclosures in relation
to the provisional rating assigned, and in relation to a definitive
rating that may be assigned subsequent to the final issuance of the debt,
in each case where the transaction structure and terms have not changed
prior to the assignment of the definitive rating in a manner that would
have affected the rating. For further information please see the
ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit
support from the primary entity(ies) of this rating action, and
whose ratings may change as a result of this rating action, the
associated regulatory disclosures will be those of the guarantor entity.
Exceptions to this approach exist for the following disclosures,
if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.
The following information supplements Disclosure 10 ("Information
Relating to Conflicts of Interest as required by Paragraph (a)(1)(ii)(J)
of SEC Rule 17g-7") in the regulatory disclosures made at
the ratings tab on the issuer/entity page on www.moodys.com
for each credit rating as indicated:
Moody's was not paid for services other than determining a credit
rating in the most recently ended fiscal year by the person(s) that paid
Moody's to determine this credit rating.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has issued
the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
Paolo Leschiutta
VP - Senior Credit Officer
Corporate Finance Group
Moody's Italia S.r.l
Corso di Porta Romana 68
Milan 20122
Italy
Telephone:+39-02-9148-1100
Eric de Bodard
MD - Corporate Finance
Corporate Finance Group
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Releasing Office:
Moody's Italia S.r.l
Corso di Porta Romana 68
Milan 20122
Italy
Telephone:+39-02-9148-1100
Moody's upgrades SABMiller plc to A3; stable outlook
