DSI Samson Group at 'AA (lka) with stable outlook
Fitch Ratings has affirmed Sri-Lanka based footwear and tire manufacturer and retailer DSI Samson Group (Private) Limited (DSG) at 'AA(lka)'. The Outlook is Stable.
The affirmation and Stable Outlook reflect Fitch's belief that DSG will maintain sufficient liquidity and healthy operating performance in the next one to two years such that its leverage and fixed-charge coverage will remain adequate for its rating.
The 'AA(lka)' rating reflects DSG's market leadership in the highly fragmented and competitive footwear retailing space, which is supported by an island-wide network of 200 outlets and its in-house manufacturing. DSG is also a market leader in the domestic two-wheeler and three-wheeler tire segments. The high competition in these segments is counter-balanced by recurring demand for most of DSG's footwear and tire products.
Fitch expects DSG's footwear revenue to recover by 11% in the financial year ending March 2022 (FY22), after an estimated 14% fall in FY21 due to severe movement restrictions in 1HFY21. School footwear revenue (around 7% of total sales in FY21) dropped by 43% in FY21 due to school closures, which ended in August 2020. However, school footwear revenue is likely to remain weak in FY22 due to the resurgence of the virus and ensuing temporary closures. We expect DSG's footwear revenue to recover to pre-pandemic levels only in FY23.