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Moody's affirms soft drinks maker Suntory Beverage on leading position in Japan

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Moody's affirms soft drinks maker Suntory Beverage on leading position in Japan

Moody's Japan KK on Aug. 22 affirmed the ratings of Suntory Beverage & Food Ltd., citing the company's leading position in Japan's soft beverage market that generates stable cash flow.

The affirmation applies to Tokyo-based Suntory's A3 issuer rating and (P)A3 senior unsecured medium-term note program.

The outlook on the company's rating is stable, reflecting Suntory's stable demand in the mature Japanese soft beverage market, which, according to Moody's, is core to its cash flow.

Apart from its leading market position in its home market of Japan, Suntory also has greater geographic diversification in Europe, the U.S. and the rest of Asia-Pacific, according to the rating agency.

Meanwhile, Moody's said the company's long-term goal of recording ¥2.5 trillion in revenue by 2030 posts acquisition event risk. It said Suntory has to undertake large-scale acquisitions to achieve its goal.

Moody's noted that environmental risk is generally not material to the drinks sector. However, extreme weather can have an impact on Suntory's operations, such that an unusually hot summer that causes a boost in demand could strain the company's production and distribution capacity, the agency said.

The rating agency said Suntory shows its independence from its parent, Suntory Holdings Ltd., as a listed company.

Moody's said Suntory could see a positive rating if it increases its operating cash flow or reduces its leverage while improving its geographic diversification and profitability.

A negative effect on its rating is also likely if Suntory's profitability or liquidity deteriorates as a result of loss of market share.

As of Aug. 22, US$1 was equivalent to ¥106.48.