A technician at the Car &General headquarters in Nairobi. Photo/FILE
By GEORGE NGIGI, gngigi@ke.nationmedia.com
IN SUMMARY
Move comes few months after the agency, South African based Global Rating Company (GCR), assigned the firm a negative outlook.
GCR had given the firm a negative outlook based on dropping sales, increased competition and rising debt.
NSE-listed machine and equipment reseller Car and General (Cargen) has withdrawn from credit rating process for yet to be undisclosed reasons.
The company’s decision to exit from the rating comes a few months after the rating agency, South African based Global Rating Company (GCR), assigned a negative outlook to the company.
“Global Credit Ratings has today withdrawn Car and General (Kenya) Limited’s national scale long term and short term debt ratings of BBB-(KE) and A3(KE) respectively, as the entity has chosen to stop participating in the rating process,” said the rating company which is licensed by the Capital Markets Authorities to grade the creditworthiness of Kenyan companies.
GCR had given the firm a negative outlook based on dropping sales, increased competition and rising debt.
As at end of September last year the firm had Sh1.9 billion debt. Its gearing ratio — calculated as net debt divided by capital — stood at 70 per cent.
The rating agency had advised Cargen to sell some of its land holdings to clear debt obligations to help it reduce interest costs.
Cargen management, however, hold a positive outlook of the firm having seen its net profit increase by 18 per cent last year to Sh315 million driven by a rise in revenues. It, however, concurs that it is faced with stiffer competition which could result in lower margins.
“This year will be extremely challenging with the expected increase in stronger competition which may lead to a decline in margin,” said company chairman Nicholas Ng’ang’a in the firm’s annual report.
Its motorcycle business has also been adversely affected by introduction of value added tax on unit sales besides rivalry from Asian imports.
Other local firms that have been rated by GCR include KCB, Equity Bank, CBA, Stima Sacco, Mumias Sugar, TPS East Africa, UAP Insurance, Nakumatt and Mabati Rolling Mills.
Most companies have, however, been slow to embrace the rating process because it passes information to shareholders on a platform that they do not control.
Sources within the financial industry said the rating companies usually approach directors of a company and not the top management to get approvals to rate the firm because it is easier to convince the board.
Auditors’ comments in annual reports do not give details of their findings but a conclusion on whether proper books have been kept by the company and if they received explanations for their concerns. It is the prerogative of the rated company to publish a credit report.
Most recently Mumias Sugar received a rating downgrade to A from A+, due to cane shortage which has limited its production capacity.
Credit rating reports have been perceived as an exercise companies go through when they intend to raise cash, especially from international market.
No comments :
Post a Comment