RAM Ratings reaffirms ratings of debt facilities under F&N Holdings’ funding vehicle

Published on 17 Jul 2020.

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RAM Ratings has reaffirmed the respective AA1(s)/Stable and P1(s) ratings of F&N Capital Sdn Bhd’s RM750 mil MTN Programme (2013/2028) and RM750 mil CP Programme (2013/2020). The debt facilities are backed by full, unconditional and irrevocable corporate guarantees from F&N Capital’s parent, Fraser & Neave Holdings Bhd (F&N Holdings or the Group). As such, the ratings reflect the credit profile of the Group.

The reaffirmation of the ratings is anchored by the strong operational and financial performance of F&N Holdings. The Group’s credit metrics are expected to remain comfortably within its rating threshold despite near-term weakness arising from the COVID-19 pandemic. 

Given its consumer-centric business, the economic downturn amid the movement control order (MCO) and the COVID-19 outbreak will affect consumption and, in turn, the Group’s sales and earnings. There was limited impact from the MCO in 1H FY Sep 2020 as it was only imposed on 18 March 2020. Revenue and operating profit before depreciation, interest and tax (OPBDIT) increased a respective 4.0% and 4.7% y-o-y. That said, we expect F&N Holdings’ operations to face more pressure in 2H FY Sep 2020 due to the more pronounced effects of the MCO then. 

Our stressed scenario shows that the Group’s revenue and OPBDIT could decline up to a respective 10% and 15% for the full fiscal year. However, we derive comfort from its strong debt coverage and liquidity position, which will allow it to weather this tough period. Its adjusted funds from operations debt cover (FFODC) are expected to remain robust at above 2 times over the next couple of years, thanks to steadfast operating profit and minimal debt (FY Sep 2019: 3.24 times; 1H FY Sep 2020: 4.47 times). F&N Holdings also retained its net-cash position as at end-March 2020, thus allowing some room for discretionary spending if needed.

F&N Holdings managed to solidify its leadership in isotonic beverages as well as in Thailand’s canned milk market. The ratings are also supported by the Group’s diversified product line-up, with some degree of geographical diversity (via its operations in Malaysia and Thailand, coupled with rising exports). Nonetheless, its ready-to-drink operations depend much on 100Plus, which generates half of this division’s sales volumes and a substantial portion of its profits.

The ratings are moderated by the keen competition that is eroding the shares of the domestic beverage and canned milk markets. The availability of a wide array of products and the continual debut of cheaper offerings renders this industry quite challenging. Given that F&N Holdings’ costs mainly stem from raw materials and packaging, its margins fluctuate in tandem with the volatile prices of these items. 


Analytical contact
Nurhayati Sulaiman
(603) 3385 2518

Amy Lo
(603) 3385 2509

Media contact
Padthma Subbiah
(603) 3385 2577


The credit rating is not a recommendation to purchase, sell or hold a security, inasmuch as it does not comment on the security’s market price or its suitability for a particular investor, nor does it involve any audit by RAM Ratings. The credit rating also does not reflect the legality and enforceability of financial obligations.

RAM Ratings receives compensation for its rating services, normally paid by the issuers of such securities or the rated entity, and sometimes third parties participating in marketing the securities, insurers, guarantors, other obligors, underwriters, etc. The receipt of this compensation has no influence on RAM Ratings’ credit opinions or other analytical processes. In all instances, RAM Ratings is committed to preserving the objectivity, integrity and independence of its ratings. Rating fees are communicated to clients prior to the issuance of rating opinions. While RAM Ratings reserves the right to disseminate the ratings, it receives no payment for doing so, except for subscriptions to its publications.

Similarly, the disclaimers above also apply to RAM Ratings’ credit-related analyses and commentaries, where relevant.

Published by RAM Rating Services Berhad
© Copyright 2020 by RAM Rating Services Berhad

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