Yulon credit rating spells growth

Taiwan Ratings Corp (中華信評) yesterday confirmed its "twA" long-term and "twA-2" short-term corporate-credit rating for Yulon Motor Co (裕隆汽車), reflecting a stable outlook for the company this year.

"The ratings reflect Yulon's good profitability, strong balance sheet and excellent cash position... with zero debt," Taiwan Ratings, a local partner of Standard & Poors, said in a report released yesterday.

Yulon Motor reported strong pre-tax earnings of NT$6.1 billion last year, coming mainly from auto manufacturing and an investment portfolio of more than 40 companies. It projected a conservative pre-tax profit of NT$5 billion.

Taiwan Ratings said Yulon Motor's financial projections tend to be conservative, while actual results have consistently outperformed forecasts in recent years. The company's conservative management style is also one of the factors affecting the credit rating, the agency said.

However, Taiwan Ratings warned that Yulon Motor had to be cautious because "their strengths are offset by a highly competitive and saturated market."

New-car registrations in Taiwan reached 474,318 units last year, up 16.66 percent from 406,580 units in 2003, according to statistics compiled by the Ministry of Transportation and Communications.

Taiwan Ratings expects the figure to rise slightly this year in line with projected steady growth in Taiwan's economy, which is expected to expand 4.21 percent this year, according to the government's statistics bureau.

In addition to the new Teana sedan that hit the market last October, Yulon Motor may have to introduce a new version of its Sentra model to strengthen its position in the nation's sedan market, which still lags far behind Toyota-distributor Hotai Motor Corp (和泰汽車).

The returns on its investment in China's Aeolus Automobile Co (風神), a joint venture with Chinese DongFeng Motor Co (東風汽車), could also help bolster the company's profits, Taiwan Ratings said.