Fitch Ratings has taken rating action on non-financial corporates following the recalibration of its Sri Lankan National Rating scale to reflect changes in the relative creditworthiness among the country’s issuers following the downgrade of the sovereign rating to ‘B-’ from ‘B’ on April 24, 2020. The Outlook on Sri Lanka’s Long-Term Issuer Default Rating (IDR) is Negative.
Fitch has revised the National Long-Term Ratings of three Sri Lankan corporates: - Hemas Holdings PLC revised to ‘AAA(lka)’/Stable from ‘AA-(lka)/Stable; - Lion Brewery (Ceylon) PLC revised to ‘AAA(lka)’/Stable from ‘AA-(lka)’/Stable; and - Sunshine Holdings PLC revised to ‘A(lka)’/Stable from ‘A-(lka)’/Stable.
At the same time, Fitch affirmed National Long-Term Ratings of Singer (Sri Lanka) PLC BB+(lka)/Negative), Sri Lanka Telecom PLC (SLT, AA+(lka)/Negative), DSI Samson Group (Private) Limited (DSI, BBB(lka)/Stable), Abans PLC (BBB+(lka)/Negative), Ceylon Electricity Board (CEB, AA+(lka)/Negative), Distilleries Company of Sri Lanka PLC (DIST, AAA(lka)/Stable), Melstacorp PLC (AAA(lka)/Stable) and Dialog Axiata PLC (AAA(lka)/Stable).
In addition, Fitch maintained the Rating Watch Negative (RWN) on Sierra Cables PLC (BB (lka)). The affirmations reflect the view that the above ratings are unaffected, following the recalibration of the Sri Lankan national scale ratings A full list of the rating action is at the end of the commentary.
National scale ratings are a risk-ranking of issuers in a particular market designed to help local investors differentiate risk. Fitch’s Sri Lankan national scale ratings are denoted by the unique identifier ‘(lka)’.
The revision of Hemas’ National Long-Term Rating reflects the recalibration of the Sri Lankan national scale ratings as well as our view that Hemas will maintain its leverage - defined as net debt/EBITDA - in line with a ‘AAA(lka)’ rating. Hemas’ rating reflects its increasing exposure to defensive healthcare and consumer goods, while gradually exiting cyclical non-core sectors such as leisure.
The rating also benefits from Hemas’ exceptionally strong balance sheet and high rating headroom before the economic downturn.
“We expect Hemas’ pharmaceutical sales to remain stable throughout FY21 due to defensive demand and the government classifying pharmaceutical imports as essential goods, even as it imposed restrictions on a wide range of other imports to preserve foreign exchange. The revision of Sunshine’s National Long-Term Rating reflects the recalibration of the Sri Lankan national scale ratings. Sunshine’s ‘A(lka)’ rating is also reflective of its leading positions in defensive sectors such as healthcare, fast-moving consumer goods such as packaged tea retailing, and protected sectors such as crude palm oil. “We expect Sunshine to maintain its leverage commensurate with an ‘A(lka)’ rating in the medium term, despite vulnerability of some of its segments to the coronavirus pandemic.”
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