Rising leverage has put pressure on the credit profile of the rated Thai conglomerate The Siam Cement Public Company Limited (SCC, A+(tha)/Negative), Fitch Rating says in a report.
The risks to deleveraging are reflected in the Negative Outlook on the rating. SCC's net debt/EBITDA reached 3.8x by end-June 2022 (2.7x at end-2021), driven by capex mainly for its Long Son Petrochemicals project in Vietnam and other investments to expand in ASEAN, as well as weaker cash inflow. Fitch expects that it could take more than 18 months for SCC to deleverage to below 3.5x, which is the highest threshold for its rating.
SCC's Fitch-adjusted operating EBITDA fell by 43% yoy in 1H22, mainly on weak petrochemical spreads. Fitch expects SCC's EBITDA to deteriorate to THB60 billion in 2022 from THB75 billion in 2021. Uncertainty over demand growth and high inflation are likely to pressure SCC's profitability in 2022, and continue to do so in 2023, albeit to a lesser extent. EBITDA in 2023 will be supported by the start of operations at Long Son Petrochemicals and capacity additions following recent acquisitions, although slowing economic activity on account of rising interest rates and inflationary pressures could weigh on the pace of recovery.
The full report "What Investors Want to Know: Siam Cement" is available at www.fitchratings.com or by clicking the link above.