Bangkok--2 Oct--Fitch's rating Fitch Ratings (Thailand) Limited has today revised the rating Outlook on Canadoil Asia Limited’s (CASIA) National debt ratings to Positive from Stable. At the same time, the agency has affirmed the ‘BBB(tha)’ National Long-term ratings on CASIA’s outstanding secured debentures, amounting to THB1.0 billion, due March 2008 and May 2010, and the ‘F3(tha)’ National Short-term rating on its THB1.0bn short-term bills of exchange programme. The agency says the Outlook revision is based on the expectation that the capacity expansion, via new product lines which has been financed by new capital, will help to generate higher cash flow and reduce financial leverage faster than previously expected, and that the company is likely to maintain conservative financial policies on business expansion. EBITDAR and cash flow from operations from existing capacity plus new capacity should further facilitate debt reduction provided there aren’t major debt-funded investments over the next few years. Net adjusted debt/EBITDAR is expected to decrease to around 2.5x by the end of 2007, and decline to below 2.0x in 2008. The secured ratings reflect CASIA’s creditworthiness, which is enhanced by mortgages over land, building and machinery and negative pledge of other assets except for normal trading activities. CASIA’s creditworthiness is based on the company’s strong presence in Asia via its parent group’s long track-record and global customer base. Despite commencing its operations recently, in 2002, CASIA has established a strong reputation with all major end-users in Asia for high quality standards, controls and timely delivery. The ratings also reflect CASIA’s cost competitiveness and its limited exposure to the volatility of raw material prices given the nature of its business, which allows a pass through of incremental costs to end buyers. In addition, the promising demand from offtake industries, particular oil & gas and petrochemicals, should support demand for piping. Also, the ratings have taken into account its exposure to the cyclical petrochemicals and energy sectors, as well as foreign exchange risk exposure and high short term borrowing. Nearly all debt is denominated in THB, while most of its earnings are in foreign currencies, mainly USD and the Euro. Related company exposure also poses some risk. There is a possibility that CASIA would support related companies if required, which could impact its creditworthiness. A lower level of reporting and accounting requirements for private companies make it more difficult to effectively monitor the company’s performance. CASIA continued to report strong sales and profitability in 2006, thanks to strong sales volume growth. EBITDAR was THB407 million, up 36.1% yoy, on the back of THB1.2bn sales. With the repayment of the advance payment from Canadoil Pipe to CASIA in June 2006, total adjusted debt decreased to THB1.7bn at end-2006, from THB2.4bn at end-2005. Together with continued strong EBITDAR generation, net adjusted debt/EBITDAR improved to 4.2x in 2006 from 7.9x in 2005. Short-term debt also decreased to THB707m. Although it is still relatively high, accounting for 41% of total debt and 1.7x of EBITDAR at end 2006, it is partly mitigated by lower financial leverage and strong order backlog to support operating cash flow. CASIA had unencumbered cash balance of THB33m and undrawn overdrafts and other credit facilities of around THB1.4bn at end-2006 to support its liquidity. Established in 1999, CASIA is a manufacturer of heavy-duty and large-diameter butt-weld pipe fittings, used mainly in the oil and gas, petrochemicals, power and civil engineering industries. CASIA is a member of Canadian-based Canadoil Group, one of the few major global providers of piping solutions with an extensive global sales network. CASIA operates as a production base and a distribution centre for Canadoil Group, with its main focus on the Asian market. CASIA is a private company, owned by Globalspace Energy Investments S.L. Note to Editors: Fitch’s National ratings provide a relative measure of creditworthiness for rated entities in countries with relatively low international sovereign ratings and where there is demand for such ratings. The best risk within a country is rated ‘AAA’ and other credits are rated only relative to this risk. National ratings are designed for use mainly by local investors in local markets and are signified by the addition of an identifier for the country concerned, such as ‘AAA(tha)’ for National ratings in Thailand. Specific letter grades are not therefore internationally comparable. Contacts: Lertchai Kochareonrattanakul Tel: +662 655 4760; Wasant Polcharoen +662 655 4763; Vincent Milton +662 655 4759. Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.