TRIS Rating Co., Ltd. has assigned the company rating of Sahaviriya Steel Industries PLC (SSI) at "BBB" with "stable" rating outlook. The rating reflects the company's leading domestic market position in flat steel products, its steady increase in revenue contribution from premium grade products, government measure to protect local producers and favorable domestic demand for steel products. These strengths are partially offset by the highly competitive and cyclical nature of the steel industry, increased competition from local manufacturers and intensive working capital usage.
The "stable" outlook reflects TRIS Rating's expectations that SSI will be able to maintain acceptable operating results throughout the steel cycle. Strong demand for steel products in the domestic market is expected to be sustained over the next 3-5 years. TRIS Rating has not factored in potential investment in a major project that are under study by the Sahaviriya Group. However, should the company decides to participate in that project, TRIS Rating expects that such investment will not materially affect SSI's financial status.
TRIS Rating reported that SSI is the first manufacturer of hot-rolled coil (HRC) in Thailand. Presently, the company is the largest manufacturer of HRC in South East Asia, with a production capacity of four million metric tonnes (MT) per year. SSI's main focus is on the domestic market, which accounted for 92% of total sales in 2004. The favorable outlook for the construction industry, due to government policy to create many megaprojects, will benefit SSI because around 46% of SSI's revenue generation is from the construction industry. SSI has a competitive edge in terms of production cost. To maintain competitiveness in the market, SSI's major challenges are to sustain low cost production and to continue increasing its shares in premium grade markets. In terms of volume sold in the local market, SSI has the largest market share in hot-rolled coil, totalling around 34% in 2004. Competition in the local market is expected to be more intense from the reentry of two HRC producers that have completed their debt restructuring programs. However, local producers continue to benefit from the Thai government's anti-dumping measure to charge tariffs that range between 3.45% to 128.11% for imported products from 14 countries.
SSI's 2004 financial performance reached new heights in many aspects, driven by very favorable global steel market conditions as well as the recovery of the Thai economy. Total revenue and earnings before interest, tax, depreciation and amortization (EBITDA) in 2004 were Bt36,875 million and Bt6,352 million, respectively. The funds from operations (FFO) to total debt ratio increased from 37.17% in 2003 to 50.47% in 2004 and total debt to capitalization improved from 40.85% in 2003 to 37.94% in 2004. However, these ratios weakened during the first quarter of 2005 because of the significant increase of debts incurred to finance the company's inventories. FFO in the first quarter of 2005 was Bt685 million, declined from the record of Bt1,547 million during the same period in 2004 because the plant was shut down for one month to complete the capacity expansion project, TRIS Rating said. -- End
Sahaviriya Steel Industries PLC (SSI)
Company Rating: BBB
Rating Outlook: Stable
The "stable" outlook reflects TRIS Rating's expectations that SSI will be able to maintain acceptable operating results throughout the steel cycle. Strong demand for steel products in the domestic market is expected to be sustained over the next 3-5 years. TRIS Rating has not factored in potential investment in a major project that are under study by the Sahaviriya Group. However, should the company decides to participate in that project, TRIS Rating expects that such investment will not materially affect SSI's financial status.
TRIS Rating reported that SSI is the first manufacturer of hot-rolled coil (HRC) in Thailand. Presently, the company is the largest manufacturer of HRC in South East Asia, with a production capacity of four million metric tonnes (MT) per year. SSI's main focus is on the domestic market, which accounted for 92% of total sales in 2004. The favorable outlook for the construction industry, due to government policy to create many megaprojects, will benefit SSI because around 46% of SSI's revenue generation is from the construction industry. SSI has a competitive edge in terms of production cost. To maintain competitiveness in the market, SSI's major challenges are to sustain low cost production and to continue increasing its shares in premium grade markets. In terms of volume sold in the local market, SSI has the largest market share in hot-rolled coil, totalling around 34% in 2004. Competition in the local market is expected to be more intense from the reentry of two HRC producers that have completed their debt restructuring programs. However, local producers continue to benefit from the Thai government's anti-dumping measure to charge tariffs that range between 3.45% to 128.11% for imported products from 14 countries.
SSI's 2004 financial performance reached new heights in many aspects, driven by very favorable global steel market conditions as well as the recovery of the Thai economy. Total revenue and earnings before interest, tax, depreciation and amortization (EBITDA) in 2004 were Bt36,875 million and Bt6,352 million, respectively. The funds from operations (FFO) to total debt ratio increased from 37.17% in 2003 to 50.47% in 2004 and total debt to capitalization improved from 40.85% in 2003 to 37.94% in 2004. However, these ratios weakened during the first quarter of 2005 because of the significant increase of debts incurred to finance the company's inventories. FFO in the first quarter of 2005 was Bt685 million, declined from the record of Bt1,547 million during the same period in 2004 because the plant was shut down for one month to complete the capacity expansion project, TRIS Rating said. -- End
Sahaviriya Steel Industries PLC (SSI)
Company Rating: BBB
Rating Outlook: Stable