TRIS Rating Co., Ltd. has affirmed the company rating of Wiik & Hoeglund PLC (KWH) at "A-" with "negative" outlook. The rating is based on the company's long track record in the domestic high density polyethylene (HDPE) pipe market, its leading market position, strong technical and financial support from its major shareholder, KWH Pipe Ltd. of Finland, and its presence in regional markets. However, these strengths are partially offset by declining profit margins due to the limited ability to fully pass on higher raw material prices to its customers, intense competition in both domestic and export markets, low barriers to entry, and the reliance on government spending on new infrastructure projects.
TRIS Rating said that the "negative" outlook reflects the eroded margins of KWH as its ability to fully pass on higher costs to customers is constrained by fierce competition resulting from oversupply in the domestic market and the slowdown of several government projects. In addition, debt leverage is also higher than expected since almost Bt200 million of short-term debt was used to fund working capital. KWH's rating could be lowered within the next six months if the company is unable to improve its financial profile to an acceptable level for this rating category.
WH's sales volume in 2004 was rather disappointing due to a sharp increase in the price of its major raw material, HDPE resin, which caused the price of HDPE pipe to increase and delayed orders from several projects. Unstable raw material prices make pricing of its finished products more difficult and caused the profit margin to deteriorate more than expected, TRIS Rating said. -- End
Wiik & Hoeglund PLC (KWH) Company Rating: Affirmed at A- Rating Outlook: Negative
TRIS Rating said that the "negative" outlook reflects the eroded margins of KWH as its ability to fully pass on higher costs to customers is constrained by fierce competition resulting from oversupply in the domestic market and the slowdown of several government projects. In addition, debt leverage is also higher than expected since almost Bt200 million of short-term debt was used to fund working capital. KWH's rating could be lowered within the next six months if the company is unable to improve its financial profile to an acceptable level for this rating category.
WH's sales volume in 2004 was rather disappointing due to a sharp increase in the price of its major raw material, HDPE resin, which caused the price of HDPE pipe to increase and delayed orders from several projects. Unstable raw material prices make pricing of its finished products more difficult and caused the profit margin to deteriorate more than expected, TRIS Rating said. -- End
Wiik & Hoeglund PLC (KWH) Company Rating: Affirmed at A- Rating Outlook: Negative