Fitch Ratings has affirmed Sri Lanka-based Lion Brewery (Ceylon) PLC’s National Long-Term Rating at ‘A+(lka)’. The Outlook is revised to Stable from Negative. Fitch has also affirmed the National Long-Term Rating on Lion’s outstanding senior unsecured debentures at ‘A+(lka)’.
The Outlook was revised to Stable because we expect Lion to be able to maintain leverage (defined as lease-adjusted debt net of cash / operating EBITDAR) at less than 3.0x over the medium term. Lion was able to improve its net leverage to 2.7x as of March 31, 2018 (FYE18) from 6.3x at FYE17, helped by the recovery in sales volume and operating profitability. The recovery was underpinned by a revision in excise taxes, which was announced in the Sri Lankan government’s budget on November 9, 2017. The revised regime taxes alcoholic beverages with lower alcohol content at reduced rates compared to spirits. Fitch rates Lion on its standalone strength due to weak linkages between Lion and its ultimate parent, Carson Cumberbatch PLC, in line with Fitch’s Parent and Subsidiary Rating Linkage criteria.
Lion’s ‘A+(lka)’ rating reflects its leading market position in the domestic beer industry, which is protected by stringent regulation, a well-established brand and extensive retail coverage.
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