Short-Term Corporate Credit Rating on Roquette Frères Affirmed at 'A-1'

Paris (Standard & Poor's CreditWire) March, 2001 - Standard & Poor's today affirmed its 'A-1' short-term corporate credit rating on French starch manufacturer Roquette Frères (Roquette).

The rating reflects Roquette's strong positions in the competitive and volatile European starch and sweeteners industry, thanks to its focus on value-added products, competitive manufacturing base, and sound financial profile.

Demand for starch and sweeteners is rising by an average 3 % - 4 % per year in the UE. While the industry is highly consolidated - the five largest players, including Roquette, have a combined European market share of about 80 % - it is highly competitive and subject to disruption by capacity additions. Moreover, pricing is volatile and largely determined by the market, with even majors players having limited pricing power. Market conditions in Europe, which deteriorated in 1996, have been improving since late 1999 as demand has picked up, capacity additions by new entrants have been absorbed, and the oversupply in potato-based starch has subsided.

Roquette has solid positions in the UE, where it is the second-largest starch manufacturer behind Eridania Beghin-Say's (BBB+/Watch Neg/A-2) subsidiary Cerestar USA, Inc. Its position was strengthened in 2000 with the acquisition of a starch plant in Corby in the U.K., which has given it a manufacturing presence in one of the largest European markets. The group also operates in the U.S. - where it remains a secondary player, however - and exports its products worldwide.

While providing a comprehensive range of starch and sweeteners, Roquette focuses on value-added products. It has particularly strong positions in dry sweeteners (such as dextrose and maltodextrin), liquid and dry polyols (such as sorbitol mannitol, and maltitol) and fermentation products. Roquette's focus on value-added products is underpinned by significant research and development capabilities. The group also benefits in the EU from a large, cost-efficient, and consolidated manufacturing base, which enables it to benefit from substantial economies of scale. Roquette's solid business positions translate into profitability that is well above the industry average ; moreover, profits have remained broadly stable in recent years, despite depressed market conditions, demonstrating the group's resilience.

Roquette's financial profile is sound, reflecting management's conservative financial policy. The group currently has no net debt.

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Roquette Frères
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