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21/11/2019 15:59

Want Want China's interim net support A3 ratings - Moody's

[ET Net News Agency, 21 November 2019] Moody's Investors Service says Want Want China
Holdings Limited's (00151) stable revenue and improved profitability in the first half of
the fiscal year ending March 2020 (1H fiscal 2019) support its A3 issuer rating, as well
as the senior unsecured rating on the USD bonds issued by Want Want China Finance Limited
and guaranteed by Want Want China Holdings Limited.
The rating outlook remains stable.
"The company reported a significant margin increase and robust 14.0% year-on-year EBITDA
growth for 1H fiscal 2019, underpinned primarily by its improved product mix and lower
costs for some raw materials, such as sugar and paper," said Ying Wang, a Moody's Vice
President and Senior Analyst.
"Want Want's solid cash flow, low leverage and stable net cash position continue to
anchor its strong financial profile," added Wang.
Want Want reported an operating margin of 25.2% for 1H fiscal 2019, up 356 basis points
from 1H fiscal 2018.
While total revenue for 1H fiscal 2019 increased by only 0.6% to RMB9.3 billion from a
year ago, the dairy and beverage segment grew 5.5%, accounting for 53.2% of total revenue
in 1H fiscal 2019. The segment also has the highest operating margin (30.9%) among Want
Want's key revenue segments.
Revenue from the rice crackers segments, which represented 19.6% of total revenue in 1H
fiscal 2019, declined by 2.1% from last year as the company shifted away from lower-margin
Revenue from the snack foods segment, which represents 27.0% total revenue in 1H2019,
fell 6.2% as a cooler summer hampered popsicles distribution.
The rice crackers and snack foods segments carry operating margins of 15.8% and 20.5%,
Moody's expects the company to grow its total revenue at a single-digit percentage rate
over the coming 12-18 months, as it continues to optimize its product mix and introduces
new and seasonal products.
The company's gross margin expanded by 439 basis points in 1H fiscal 2019 from 44.5% in
1H fiscal 2018, mainly driven by lower raw material costs for sugar and packaging
material. Want Want used some of this gross margin gain to fund higher selling, marketing
and research development costs, as a result of which its adjusted EBITDA margin expanded
at a slightly lower rate to 31.0% in 1H fiscal 2019 from 27.4% a year ago. (KL)

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