Published on 06 Jul 2023.
RAM Ratings has affirmed the respective AAA(s)/Stable/P1 and AAA(s)/Stable ratings of Mercedes-Benz Services Malaysia Sdn Bhd’s (MBSM or the Company) RM3 bil Commercial Papers/Medium-Term Notes (MTN) Programme (2018/2025) and RM3 bil MTN Programme (2018/2038). The two programmes are subject to a combined limit of RM3 bil.
The ratings continue to reflect the strength of the irrevocable and unconditional guarantees extended by MBSM’s ultimate parent, Mercedes-Benz Group AG (the Group) (formerly Daimler AG), which enhances the credit profile of the Company’s debt facilities beyond its standalone credit strength.
Mercedes-Benz Group AG’s credit profile is reflective of its strong competitive position as a leading global premium vehicle manufacturer and the sturdy financial metrics of its automotive business. The Group’s unit sales volume increased 29% in FY Dec 2022 owing to normalising supply chains and economic recovery, resulting in revenue growth of 12.0% to EUR150 bil (FY Dec 2021: EUR133.9 bil). Pre-tax profit surged 45.1% y-o-y to EUR17.9 bil (fiscal 2021: EUR12.3 bil), mainly driven by higher unit sales, improved pricing and a favourable product mix.
Excluding the gross debt of its financial services division, Mercedes-Benz Group AG remained in a net cash position with EUR14.0 bil of net cash. This provides adequate funding for its electric vehicle capital outlays while offering ample buffer against any unexpected industry downturns in the next two years. The Group’s hefty orderbook which lasts well into 2H FY Dec 2023 will also sustain vehicle sales for the year.
MBSM and Mercedes-Benz Malaysia Sdn Bhd (MBM, the domestic wholesale distributor of Mercedes-Benz vehicles and spare parts) represent Mercedes-Benz Group AG’s operations in Malaysia. The Company is the captive financier for MBM, having financed 4.1 out of 10 new passenger cars in 2022. MBSM’s standalone credit profile is anchored by the Company’s satisfactory asset quality indicators which moderate rating weaknesses from a highly leveraged balance sheet and an inherent dependence on wholesale funding.
MBSM’s gross impaired financing (GIF) ratio eased to 0.9% as at end-2022 (end-2021: 1.8%) following the expiry of the Covid-19 Bill which allowed repossessions to commence. In line with better asset quality indicators, the Company booked a net provisioning writeback of RM20.2 mil in fiscal 2022 (fiscal 2021: RM7.4 mil) while GIF coverage stayed sturdy at 136% as at end-2022. The reversal of impairment charges propped up pre-tax profit to RM70.0 mil (FY Dec 2021: RM47.1 mil). MBSM’s pre-impairment return on assets also improved to 2.2% from 1.8% a year earlier as its net interest margin expanded to 2.7% (fiscal 2021: 2.6%).
The Company’s gearing remained elevated at 10.3 times as at end-2022 (end-2021: 9.9 times). That said, all its borrowings (including debt facilities) are guaranteed by Mercedes-Benz Group AG, whose financial support will be forthcoming when needed.
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Ratings on Mercedes Benz Services Malaysia Sdn Bhd