TRIS Rating Co., Ltd. has upgraded the company rating of Vinythai PLC (VNT) to “A-” from “BBB+” with “stable” outlook. The rating is based on the company’s efficient fully-integrated production facility platform fully integration production, strong financial profile, itscapable management team, and support from its principal shareholders, Solvay S.A. of Belgium, PTT Chemical PLC (PTTCH), and Charoen Pokphand Group (CP Group). The rating also takes into consideration successful expansion projects which strengthen its operating cash flow. However, these strengths are partially offset by the cyclical nature of the petrochemical industry, the increasing competition from Chinese producers, and lower operating margins resulting from affected by rising ethylene prices.
The “stable” outlook reflects the expectations that VNT will be able to maintain its low cost position and there will be no major threats to the PVC industry. TRIS Rating expects VNT’s management to continue its conservative financial policy in the intermediate to long term.
TRIS Rating reported that VNT is Thailand’s second largest polyvinyl chloride (PVC) PVC manufacturer, with capacity of 280,000 metric tons per annum (mtpa), or about 28% of total domestic capacity. Major shareholders have extended full supports to VNT’s operation: Solvay provides technical support and international distribution channel, PTTCH supplies ethylene, and CP Group is a key customer. The PVC plant is fully backward integratedion, yielding athe premium operating margin to VNT overcompared with its rivals. However, due to a substantial rise in the price of with the greatly rising ethylene price over PVC since 2006, VNT’sits operating margin dropped significantly, falling from over 20% to the level of 10%-15% dropped. The epricing trend seems to persist as oil prices remain high. The competition is more severe in both the domestic and international markets, which China remains the key player. Huge new supplies have come on stream in China, been made availablewhich not only reduced its PVC imports drastically, but will also turn China into net exporter in the near futureexport.
TRIS Rating said, VNT’s performance financial profile improved as operating margin increased from 10.1% in 2006 to 13.4% in 2007, and further rose to 15.4% in the first quarter of 2008. In 2007, the company started commercial production of vinyl chloride monomer (VCM) expansion phase which increased its total sales for 60%, compared with the previous year. As a result, funds from operations (FFO) nearly doubled from Bt867 million in 2006 to Bt1,665 million in 2007 and recorded Bt488 million for the first three months of 2008. Thanks to a conservative financial policy, VNT’s leverage remains very low and interest expense is small. As at the end of 2007, the total debt to capitalization ratio declinedslightly to 12.9% from 14.1% in 2006, following the scheduled repayment of long-term loan. The ratio increased slightly to 13.8% at the end of March 2008 due to increased borrowings for working capital. The FFO to total debt ratio increased from 43.4% in 2006 to 88.8% in 2007, and was 23.7% (non-annualized) for the first three months of 2008. The earnings before interest, tax, depreciation and amortization (EBITDA) interest coverage ratio, though declining, is considered satisfactory at 22.4 times in 2006, 15.1 times in 2007 and 12.4 times for the first quarter 2008. -- End
Vinythai PLC (VNT)
Company Rating: Upgraded to A- from BBB+
Rating Outlook: Stable
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Copyright 2008, TRIS Rating Co., Ltd. All rights reserved. Any unauthorized use, disclosure, copying, republication, further transmission, dissemination, redistribution or storing for subsequent use for any purpose, in whole or in part, in any form or manner or by any means whatsoever, by any person, of the credit rating reports or information is prohibited. The credit rating is not a statement of fact or a recommendation to buy, sell or hold any debt instruments. It is an expression of opinion regarding credit risks for that instrument or particular company. The opinion expressed in the credit rating does not represent investment or other advice and should therefore not be construed as such. Any rating and information contained in any report written or published by TRIS Rating has been prepared without taking into account any recipient’s particular financial needs, circumstances, knowledge and objectives. Therefore, a recipient should assess the appropriateness of such information before making an investment decision based on this information. Information used for the rating has been obtained by TRIS Rating from the company and other sources believed to be reliable. Therefore, TRIS Rating does not guarantee the accuracy, adequacy, or completeness of any such information and will accept no liability for any loss or damage arising from any inaccuracy, inadequacy or incompleteness. Also, TRIS Rating is not responsible for any errors or omissions, the result obtained from, or any actions taken in reliance upon such information.
The “stable” outlook reflects the expectations that VNT will be able to maintain its low cost position and there will be no major threats to the PVC industry. TRIS Rating expects VNT’s management to continue its conservative financial policy in the intermediate to long term.
TRIS Rating reported that VNT is Thailand’s second largest polyvinyl chloride (PVC) PVC manufacturer, with capacity of 280,000 metric tons per annum (mtpa), or about 28% of total domestic capacity. Major shareholders have extended full supports to VNT’s operation: Solvay provides technical support and international distribution channel, PTTCH supplies ethylene, and CP Group is a key customer. The PVC plant is fully backward integratedion, yielding athe premium operating margin to VNT overcompared with its rivals. However, due to a substantial rise in the price of with the greatly rising ethylene price over PVC since 2006, VNT’sits operating margin dropped significantly, falling from over 20% to the level of 10%-15% dropped. The epricing trend seems to persist as oil prices remain high. The competition is more severe in both the domestic and international markets, which China remains the key player. Huge new supplies have come on stream in China, been made availablewhich not only reduced its PVC imports drastically, but will also turn China into net exporter in the near futureexport.
TRIS Rating said, VNT’s performance financial profile improved as operating margin increased from 10.1% in 2006 to 13.4% in 2007, and further rose to 15.4% in the first quarter of 2008. In 2007, the company started commercial production of vinyl chloride monomer (VCM) expansion phase which increased its total sales for 60%, compared with the previous year. As a result, funds from operations (FFO) nearly doubled from Bt867 million in 2006 to Bt1,665 million in 2007 and recorded Bt488 million for the first three months of 2008. Thanks to a conservative financial policy, VNT’s leverage remains very low and interest expense is small. As at the end of 2007, the total debt to capitalization ratio declinedslightly to 12.9% from 14.1% in 2006, following the scheduled repayment of long-term loan. The ratio increased slightly to 13.8% at the end of March 2008 due to increased borrowings for working capital. The FFO to total debt ratio increased from 43.4% in 2006 to 88.8% in 2007, and was 23.7% (non-annualized) for the first three months of 2008. The earnings before interest, tax, depreciation and amortization (EBITDA) interest coverage ratio, though declining, is considered satisfactory at 22.4 times in 2006, 15.1 times in 2007 and 12.4 times for the first quarter 2008. -- End
Vinythai PLC (VNT)
Company Rating: Upgraded to A- from BBB+
Rating Outlook: Stable
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Copyright 2008, TRIS Rating Co., Ltd. All rights reserved. Any unauthorized use, disclosure, copying, republication, further transmission, dissemination, redistribution or storing for subsequent use for any purpose, in whole or in part, in any form or manner or by any means whatsoever, by any person, of the credit rating reports or information is prohibited. The credit rating is not a statement of fact or a recommendation to buy, sell or hold any debt instruments. It is an expression of opinion regarding credit risks for that instrument or particular company. The opinion expressed in the credit rating does not represent investment or other advice and should therefore not be construed as such. Any rating and information contained in any report written or published by TRIS Rating has been prepared without taking into account any recipient’s particular financial needs, circumstances, knowledge and objectives. Therefore, a recipient should assess the appropriateness of such information before making an investment decision based on this information. Information used for the rating has been obtained by TRIS Rating from the company and other sources believed to be reliable. Therefore, TRIS Rating does not guarantee the accuracy, adequacy, or completeness of any such information and will accept no liability for any loss or damage arising from any inaccuracy, inadequacy or incompleteness. Also, TRIS Rating is not responsible for any errors or omissions, the result obtained from, or any actions taken in reliance upon such information.