Bangkok--5 Nov--Fitch Ratings
Fitch Ratings (Thailand) Limited has today assigned a National Long-term rating of ‘A+(tha)’ to Thailand-based PTT Chemical Public Company Limited’s (PTTCH) new senior unsecured debentures of up to THB10bn, due 2013 and 2015. In addition, Fitch has assigned the same rating to PTTCH’s THB500m senior unsecured debentures, due 2015, which are issued to a group of private investors. The proceeds from these new debentures will be used to fund investments in the company’s core business.
The ratings of PTTCH are based on the high level of business and operational integration with its major shareholder - PTT Public Company Limited (PTT, ‘AAA(tha)’/Stable). PTTCH is PTT’s main gas-based olefins arm and has a favourable feedstock arrangement with the latter. PTTCH’s ratings also reflect its economy of scale and increasing level of production integration via downstream units, which should help support earnings growth and reduce earnings volatility in the longer-term. The ratings are further underpinned by PTTCH’s strong financial position and liquidity profile, providing financial flexibility despite a period of major capacity expansion. Nonetheless, the ratings take into account the cyclical nature of the petrochemicals industry, the execution risks arising from new projects, a large investment plan amid a less favourable operating environment and the company’s relatively high exposure to a single market.
For H108, PTTCH reported a substantial increase in EBITDA of 89% yoy to THB16.0bn, as it enjoyed a competitive feedstock cost in the wake of a sharp rise in petrochemicals prices driven by global high oil prices. Its EBITDA margins improved to 34% in H108 from 29% in H107, on the back of its improved product-to-feedstock margins. However, the outlook for H208 is likely to weaken due to a higher feedstock cost from the adjustment in a net-back pricing formula in Q308, a planned tie-in shutdown for new capacity in Q408, as well as the projected fall in petrochemicals prices and demand as a result of the current global economic slowdown.
PTTCH has earmarked THB69.8bn for new investments during 2008-2012 including a large scale olefins expansion through the new gas-based olefins cracker, existing plant improvements, as well as new investments in the downstream polymers and specialty chemicals. The budgeted capex also includes a 50% equity acquisition of Cognis Oleochemicals (M) Sdn Bhd, a leading global oleochemicals company in Malaysia, with a total investment cost of THB5.2bn (or EURO104m) in Q308. As such, PTTCH’s net debt is likely to substantially increase from THB10.3bn at end-H108, although the company expects it should be able to manage the net debt to EBITDA ratios at a relatively comfortable level at less than 2.0x over the expansion period. PTTCH’s liquidity profile is strong, supported by the available cash balances of THB15.0bn at end-H108 and large undrawn committed credit facilities - including THB2.6bn working capital facilities with financial institutions, a USD135m revolving credit facility and USD100m in trade credit support from PTT — which should continue to provide financial flexibility.
Contacts: Lertchai Kochareonrattanakul, Wasant Polcharoen, Vincent Milton; Bangkok, Tel: +662 655 4755.
Tassanee Mongkolrat
Executive Secretary
Administration
Tel: 662 655 4755
Fax: 662 655 4939
www.fitchratings.com