KUALA LUMPUR (March 21): RAM Rating Services said KUALA LUMPUR KEPONG BHD []’s (KLK) proposed disposal of its entire global Crabtree & Evelyn (C&E) business will not have any impact on the group debt notes’ ratings
The ratings agency has an AA1/P1 rating of the group’s RM500 million Sukuk Ijarah commercial paper/medium-term notes programme (CP/MTN) (2007/2012) and RM300 million Sukuk Ijarah CP/MTN programme (2011/2016); both long-term ratings have a stable outlook.
RAM Ratings’ Head of Real Estate and CONSTRUCTION [] Ratings said the proposed disposal was positive as the retail arm’s performance was highly seasonal and had been weighed down by the sluggish economies of Europe and the US.
“The disposal will enable KLK to focus on its core PLANTATION []s and oleochemicals operations,” she said.
KLK recently announced that it had entered into an unconditional share sale and purchase agreement with Khuan Choo International Limited, a Hong Kong-based investment-holding company, to dispose of the non-core C&E business, as part of the Group’s continuous efforts to streamline its operations.
RAM Ratings said the global financial crisis had dealt the retail arm a significant blow, with the division suffering a hefty RM77.5 million operating loss in FY September 2009 amid weak consumer sentiment in the US and Europe.
Nonetheless, the division turned around in fiscal 2010 after the closure of non-performing stores and a leaner cost structure following the completion of its restructuring plan - under Chapter 11 of the United States Bankruptcy Code – in late January 2010.
RAM Ratings noted that the bottom-line contributions from this division have been minimal in the last 2 years, at less than 3% of the group’s operating profit before interest and tax. The division posted a RM22.8 million operating profit in fiscal 2011.
The ratings agency noted that KLK had already received 10% (or RM31.7 million) of the purchase price, adding to its already-considerable RM2.04 billion cash hoard as at end-December 2011. The group was in a net-cash position as at the same date.
The ratings agency has an AA1/P1 rating of the group’s RM500 million Sukuk Ijarah commercial paper/medium-term notes programme (CP/MTN) (2007/2012) and RM300 million Sukuk Ijarah CP/MTN programme (2011/2016); both long-term ratings have a stable outlook.
RAM Ratings’ Head of Real Estate and CONSTRUCTION [] Ratings said the proposed disposal was positive as the retail arm’s performance was highly seasonal and had been weighed down by the sluggish economies of Europe and the US.
“The disposal will enable KLK to focus on its core PLANTATION []s and oleochemicals operations,” she said.
KLK recently announced that it had entered into an unconditional share sale and purchase agreement with Khuan Choo International Limited, a Hong Kong-based investment-holding company, to dispose of the non-core C&E business, as part of the Group’s continuous efforts to streamline its operations.
RAM Ratings said the global financial crisis had dealt the retail arm a significant blow, with the division suffering a hefty RM77.5 million operating loss in FY September 2009 amid weak consumer sentiment in the US and Europe.
Nonetheless, the division turned around in fiscal 2010 after the closure of non-performing stores and a leaner cost structure following the completion of its restructuring plan - under Chapter 11 of the United States Bankruptcy Code – in late January 2010.
RAM Ratings noted that the bottom-line contributions from this division have been minimal in the last 2 years, at less than 3% of the group’s operating profit before interest and tax. The division posted a RM22.8 million operating profit in fiscal 2011.
The ratings agency noted that KLK had already received 10% (or RM31.7 million) of the purchase price, adding to its already-considerable RM2.04 billion cash hoard as at end-December 2011. The group was in a net-cash position as at the same date.
