Fitch affirms Pick 'n Pay

Fitch Ratings said it affirmed South Africa-based Pick 'n Pay Stores Ltd.'s national long-term rating at A+(zaf) and short-term F1(zaf).

The outlook is stable.

The ratings reflect Pick 'n Pay's long-standing leading position in the South African grocery and general merchandise retail environment and the company's robust financial profile during fiscal year 2005, the agency said.

EBITDA margins increased to 5.7% from 5.5% in fiscal year 2005, despite a low-inflation environment, due to strong volume growth and contained trading expenses. This, together with efficient working capital management, contributed to robust operating cash flows, Fitch said.

The ratings also reflect Pick 'n Pay's exposure in Australia, where the environment remains competitive and the company is loss making at the operating level. Fitch said it favors the pursuit of long-term growth via the franchise model in Australia, which will facilitate growth, while there is limited exposure to leases or capital outlays.

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