YEREVAN, July 18. /ARKA/. Fitch Ratings has downgraded Acer Inc.’s (Acer) Long-Term Foreign- and Local-Currency Issuer Default Ratings (IDR) to ‘BB+’ from ‘BBB-‘ and its National Long-Term Rating to ‘A-(twn)’ from ‘A(twn)’. The Outlook on the ratings is Negative, Reuters reports referring to the statement released by the agency.
Acer’s financial performance over the past year has been much worse than Fitch’s previous forecast and the company underperformed its major peers in terms of operating income and margin. The downgrade reflects a deterioration in credit metrics which is likely to be sustained, weaker competitiveness and concentration in traditional personal computer (PC) business as a vendor of mobile computing devices.
Fitch is forecasting Acer to see mid-single digit declines in revenue for 2012, with an operating EBIT margin below 1% (2012: -1.3%), in view of competitive pricing pressure and many consumers’ preference for media tablets over PCs. This follows Acer’s 24% revenue decline in 2011 and its first net loss since 1995. Funds flow from operations (FFO) was negative in 2011. Fitch expects FFO to turn positive in 2012, but to less than 35% of its 2010 level.
Acer’s position in the global PC market has consistently weakened since its market share peaked in 2009. Acer’s growth in the Asia-Pacific region was unable to offset its market share loss in EMEA and the US. In 2011, Acer was ranked fourth for global PC sales although it maintained second position status for notebook sales.
Sales of Acer’s low-price mini-notebook PCs, previously an important product, have struggled to compete with media tablets. Without sufficient diversification from other products and services, Acer suffers from a prolonged PC replacement cycle as consumers defer expenditure while the global economy remains weak.
Fitch expects Acer to maintain strong liquidity with a net cash position over the medium term. The company had a cash balance of TWD60bn at end-March 2012, comfortably covering its total debt of TWD23bn.—0-
