Fitch Ratings has affirmed the foreign currency and local currency senior unsecured ratings of Turkish Brewery Anadolu Efes Biracilik ve Malt Sanayii AS (Efes) at B and BB respectively. The rating outlook is stable.
Fitch's ratings reflect Efes's strong resilience to difficult economic conditions such as those encountered in Turkey in the year 2001, including a Turkish lira/dollar exchange rate that more than doubled, a 10 percent decrease in gross domestic product (GDP) and a 55 percent inflation.
Despite these problems, its sales and operating profits were largely unaffected. Although Efes's profits were almost entirely wiped out by the foreign exchange losses on its mainly US dollar-denominated debt, its cashflow remained healthy.
The long-term prospects for the beer market are good in Turkey, as consumption per capita is growing while demographic trends are favorable.
Efes enjoys an undisputed leadership in its home market with a 77 percent market share, and the possible emergence of new competitors, from within the country or without, is quite remote due to high barriers to entry in distribution, production and marketing.
Efes also benefits from its stake in Coca Cola Bottler of Turkey, not only in terms of diversification but also of synergies in distribution.
Efes' geographical diversification in Eastern Europe and Central Asia has proven successful and, in particular, Efes Breweries International now occupies a number one market position, on a par with Heineken, in the fast growing Russian premium beer segment. Foreign operations generated 26 percent of Efes' consolidated cash operating profits in FY01.
Nevertheless, EBI's ability to pay dividends to Efes will remain low in the coming years as it is still in expansion phase, which necessitates significant capex and marketing efforts. For that reason, Efes's geographical diversification of its unencumbered cash generating abilities is not sufficient yet to allow Fitch to remove the constraint placed on Efes's foreign currency rating by the sovereign ceiling.
Efes is the largest Turkish brewer with a developing international presence and some soft drinks interests through a 33 percent stake in Coca Cola Bottler of Turkey and its ownership of Efes Invest, its international operations. — (menareport.com)
© 2002 Mena Report (www.menareport.com)
