Bangkok--23 Nov--Fitch Ratings
Fitch Ratings (Thailand) Limited has today affirmed the 'F3(tha)' National Short-term rating of Canadoil Asia Limited's (CASIA) THB1.0bn short-term bills of exchange (B/E) programme. The maturity of each series of the B/E programme will not exceed 270 days. At the same time, the agency has assigned a 'F3(tha)' National Short-term rating to CASIA's new senior unsecured short-term debentures with a maturity of 270 days and an issue size of up to THB1.0bn. The proceeds from the new debentures will be used to repay existing short-term debt. The ratings are based on the company's strong presence in Asia via its parent group's (Canadoil Group) long track record and global customer base. CASIA has established a strong reputation with major end-users for high quality standards, control and timely delivery. The ratings also reflect the company's cost competitiveness and solid ability to pass through incremental costs to end-users, given the nature of its business.
Although, the sharp fall in global oil prices over H208 resulted in capex plans of the oil and gas industry declining in 2009, demand for heavy-duty, large-diameter pipe fittings (CASIA's main product) remains encouraging; this is a result of the continued promising outlook in the oil & gas sector over the medium term and impressive growth in the water treatment and power sectors. In addition, the recent recovery of oil prices to a level of USD75-USD80 per barrel could result in an upward revision of capex plans.
CASIA's financial position weakened in 2008. Debt and financial leverage were higher than expected due to increasing working capital needs and loans to its parent. The adjusted net debt to EBITDAR ratio rose to 5.4x in 2008 (2007: 4.1x), and the adjusted net leverage to funds from operations (FFO) ratio increased to 5.2x from 4.2x. CASIA's adjusted net debt to EBITDAR and adjusted net leverage to FFO are expected to remain high at 5.5x-6.0x in 2009, given the expected weaker EBITDAR and FFO, although this is expected to be offset by the expected lower working capital requirement and decreased capital expenditure; these are however expected to improve to 3.0x-4.0x during 2010-2012.
Apart from its exposure to the cyclical petrochemicals and energy sectors, CASIA also has foreign exchange exposure. All debt is denominated in Thai baht, while most of its earnings are in foreign currency, mainly the US Dollar. Related company exposures also pose some risk. There is a possibility that CASIA would continue to support related companies if required, which could affect its financial position. Lower reporting and accounting requirements for private companies make it more difficult to effectively monitor the company's performance.
Established in 1999, CASIA is a manufacturer of heavy-duty and large-diameter butt-weld pipe fittings, used across several industries. Also, the company makes pressure vessels and pipe spoolers, which are components in various industrial plants. CASIA is a member of Canada-based Canadoil Group, a major global provider of piping solutions with an extensive global sales network.
Contacts: Lertchai Kochareonrattanakul, Pimrumpai Panyarachun, Vincent Milton, Bangkok, +662 655 4755.
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.
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