Sabic gets Fitch ratings boost
Riyadh, June 29, 2013
Fitch Ratings has affirmed Saudi Basic Industries Corporation's (Sabic) long-term issuer default rating (IDR) at 'A+', senior unsecured rating at 'A+' and short-term IDR at 'F1'. The outlook on the long-term IDR is stable.
The senior unsecured rating on Sabic Capital's guaranteed bonds has also been affirmed at 'A+'.
The ratings reflect Sabic's vertically integrated operations, state of the art world-scale production facilities and access to competitively priced natural gas feedstock in Saudi Arabia, the agency said.
The latter translates into best-in-class profitability levels and robust pre-capex cash flow generation through the cycle, Fitch said.
This in turn mitigates the inherent cyclicality in Sabic's markets (petrochemicals, fertilisers, metals) and has limited the cash flow impact of the group's large expansion projects and associated cost overrun or delays in the past.
In Fitch's view, Sabic's standalone business and financial profile already embed any benefits from its state-ownership.
Fitch believes that the group's credit metrics offer sufficient headroom for the costs (undisclosed) associated with the announced restructuring of the European operations.
These businesses are suffering from weak demand and intensifying competition in their regional markets and their performances contrast sharply with those of the Saudi operations, Fitch added.
Sabic has announced rationalisation measures aimed at optimising its cost structure and its footprint, including a 1,050 reduction in staff count.
Fitch's base case does not assume any improvement in performance in Europe in 2013.
The ratings also reflect the progress to date on Sabic's expansion programme, with reduced execution risk and increasing contributions to cash flow generation from debt-funded projects, Fitch said.-Reuters