India: SABMiller affirmed at 'BBB+/F2' with stable outlook

Fitch Ratings affirmed global brewer SABMiller PLC's (SAB) ratings, saying the ratings reflect SAB's strong geographical diversification, with more operations in fast-growing emerging market countries than most of its peers, Thomson Financial reported February 22.

SAB's senior unsecured and long-term issuer default ratings (IDR) were affirmed at 'BBB+' and short-term IDR at 'F2'.

The outlook on the long-term IDR remains stable.

Fitch added that the ratings also reflect the South African beer market's dominance in generating SAB's cash flow, which accounted for 32 pct of full-year 2007 group EBITA.

In addition, they take into account the company's moderate expected lease- and pension-adjusted net debt once the 1.2 bln usd acquisition of Royal Grolsch NV is completed in the next few weeks.

'Although SAB's weak position in the tough US market remains a major concern, the announced link-up between SAB's Miller unit and US's third-largest player, Molson Coors, should create an entity with sufficient distribution power to challenge the US market leader, Anheuser-Busch Companies Inc (nyse: BUD - news - people ),' the agency said.

It added that SAB could suffer disruption in the short- to medium-term but it should eventually achieve a higher profit per hectolitre of beer sold and benefit from a less competitive trading environment as a result of the merger.

'These positives are partly offset by the currency mismatch between SAB's net debt and cash flow; over 70 pct of group net debt is denominated in the US dollar while most of its cash flow is generated in more volatile currencies,' Fitch noted.

27 February, 2008