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Fitch revises IMT's outlook to positive
Ratings agency Fitch Ratings has revised Indonesia-based PT Ivo Mas Tunggal's (IMT) outlook to positive from stable, while its national long-term rating has been affirmed at âAA (idn)â
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atings agency Fitch Ratings has revised Indonesia-based PT Ivo Mas Tunggal's (IMT) outlook to positive from stable, while its national long-term rating has been affirmed at 'AA (idn)'.
'The outlook revision reflects the improved access of majority shareholder Golden Agri Resources (GAR) to debt and capital markets, following successful issuance in 2012 by GAR and subsidiaries of close to US$1 billion of debt,' Fitch said in an official release.
'This suggests that bond investors are no longer averse to the group due to its history of debt restructuring, which had in the past constrained its ability to raise borrowings. Fitch views GAR's improved funding access as a direct benefit to its subsidiaries, including IMT, as they mostly rely on intercompany loans for expansion plans.'
According to Fitch, the ratings continue to reflect IMT's strong strategic and operational linkages with GAR.
'IMT contributes about 25 percent of the group's annual crude palm oil (CPO) production and planted area. IMT also channels export sales through the group's trading arm, Golden Agri International while GAR extends intercompany loans and seconds key executives to IMT,' Fitch said.
IMT has completed the acquisition of three new plantations in Kalimantan, adding 23,460 hectares to its existing plantation portfolio. Given its average plantation age of about 4 to 5 years, management expects these new plantations to start contributing materially in the next 24 months, and to improve the overall plantation age to 15.9 years from 17.4 years previously.
'This acquisition will also provide IMT with medium-term growth stability, especially in light of increasingly limited acquisition opportunities,' Fitch said.
IMT will start commercial operation of its refinery in 2015, with about a 900,000 ton/year production capacity. Management estimates that up to 70 percent of internally-produced CPO will be further processed into refined products, which will significantly alter the company's product mix from mostly upstream palm oil products such as CPO and palm kernel oil.
'Fitch views this change as positive as it will enhance the group's operational integration and result in reduced costs due to lower export taxes on refined products,' Fitch said.
The ratings are constrained by the inherent cyclicality of CPO as a commodity, according to Fitch.
