Fitch affirms Abans at 'A-(lka)'

Fitch Ratings Lanka has affirmed Sri Lankan retailer Abans Pvt Ltd's (Abans) National Long-Term rating at 'A-(lka)' with stable outlook. Fitch has also assigned Abans' proposed Rs 300 million senior unsecured debenture 2011-2014 an 'A-(lka)' national long-term rating.

The affirmation reflects an expected increase in both sales (approximately up by more than 30 percent as of the first half to financial year ending March 2011 based on interim management accounts) and operating profitability in the key consumer durables segment for FY11. An expected turnaround at Abans Financial Services Ltd. (AFS) in operating profitability is also likely to aid Abans' performance in the near term. Gross profit margin fell to 28 percent in FY10 from 31 percent in FY09 and costs increased Rs 190 million due to higher import taxes as well as stock and bad debt provisions. Leverage (total adjusted net debt to operating EBITDAR) weakened significantly to 5.5x from 3.6x after EBITDAR fell 39 percent.