FRIDAY, March 29, 2024
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'AA' rating for ICC International from TRIS

'AA' rating for ICC International from TRIS

Tris Rating has affirmed the company rating of ICC International Plc at "AA" with a "stable" outlook.

 

The rating reflects the company’s position as Thailand’s leading distributor of lingerie, men’s apparel and cosmetics; a diverse portfolio of products and brands; capable management team; and its solid relations with department and discount stores.

The rating also takes into consideration the stability of the company’s operations and its debt-free position under the conservative financial policy. However, the rating is constrained by the low profitability typically associated with trading companies, and the complex shareholding structure of Saha Group.

Tris Rating expects that ICC will continue to maintain its strong positions in its key product lines, in spite of intense competition. A diverse product portfolio and a conservative financial policy help support the company’s credit quality.

The company offers more than 80 brands, covering international licensed brands and its own brands. The international brands under the ICC umbrella, such as Wacoal, Arrow, Lacoste, Daks, Guy Laroche and Elle, are well known by Thai consumers.

ICC’s products are available in department stores, discount stores and shops in more than 3,600 locations nationwide. The competence and experience of ICC’s management team, together with the support provided by suppliers within Saha Group, have allowed the company to maintain its market-leading positions.

Tris Rating said that last year ICC’s revenue grew by 14 per cent year on year to Bt12.82 billion. The impact from the severe flood in the fourth quarter was considered minimal as ICC’s revenue in this period rose by 9.3 per cent year on year. Revenue continued to grow in the first three months of this year, rising by 7.5 per cent year on year. The increase came from all product categories, reflecting its well-diversified products and market coverage, supported by solid relations with its suppliers and distribution channels. The jump in sales was also due in part to the management stimulus strategy to push for aggressive growth.

The three major contributors to ICC’s top line are the lingerie, men’s apparel and cosmetics product lines. During the last three years and the first quarter of 2012, the lingerie and men’s apparel lines each generated 25-28 per cent of ICC’s total revenue, while the cosmetics line contributed 12-13 per cent.

In the lingerie market, ICC has dominated the middle- to high-end segment, with a combined share over 60 per cent last year, as measured by sales of all brands through department stores. Wacoal has remained the leading lingerie brand for over a decade, with 56 per cent of the market last year. Although Wacoal’s market share has gradually declined due to aggressive competition and competition from new brands, it is more than four times beyond the share of the second-largest competitor. The Wacoal product line alone has generated 20-22 per cent of ICC’s total sales every year since 2008.

The strength of ICC’s men’s apparel segment is derived from the Lacoste and Arrow brands, which contributed 10 per cent and 9 per cent of sales. BSC Cosmetology, ICC’s own brand, is the core product brand in the cosmetics segment. Annual sales were Bt750 million-Bt850 million during the past three years.

ICC’s financial profile and liquidity remain strong, underpinned by its debt-free position and stable operating cashflow. ICC has continued its conservative financial policy, as the company has had no major capital investments planned and has remained debt-free since 2002.

ICC has made some guarantees to related companies to strengthen its supply chain. The total amount of outstanding guarantees has gradually fallen and remained at Bt152 million from 2009 through the end of last March. Funds from operations improved from Bt863 million in 2010 to Bt914 million in 2011, and stood at Bt188 million for the first three months of this year. As there is no financing burden, ICC retains all cashflow for working capital needs and continues its minimal dividend payout.

In the near future, ICC plans to enter the property development business by utilising its existing non-performing asset. In Tris Rating’s view, the company will be exposed to a higher risk, as the property development industry is intensely competitive and more sensitive to a cyclical economy.

Tris Rating expects that any future investments should be prudently considered so as to maintain ICC’s financial strength and ample liquidity at all times.

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