JOINT STOCK COMPANY “UZBEK METALLURGICAL PLANT” ANNOUNCES THAT THE INTERNATIONAL RATING AGENCY FITCH RATINGS HAS AFFIRMED ITS LONG-TERM ISSUER DEFAULT RATING AT "BB-" WITH THE OUTLOOK REVISED TO NEGATIVE
Joint Stock Company “Uzbek Metallurgical Plant” (RSE: UZMK) (hereinafter - Uzmetkombinat JSC, the “Company”), a leading producer of ferrous metallurgy products in Uzbekistan, announces that Fitch Ratings has affirmed its Long-term Issuer Default Rating at 'BB-' with the outlook revised from “Stable” to “Negative”.
According to the Fitch Ratings report, the revision of the outlook on the Company's rating is due to an increase in the level of debt burden in 2023-2024 beyond the expected level on the background of peak capital expenditures for the construction of the Foundry and Rolling Complex, coinciding with deteriorating market conditions and a temporary increase in production costs.
Currently, Uzmetkombinat JSC is at the final stage of realization of the project construction of the Foundry and Rolling Complex. The project will double the total capacity of finished products to 2.2 mln tons per year and should be commissioned in 2025, which, according to Fitch Ratings' expectations, will lead to a significant reduction in the company's debt burden in 2025 and subsequent years due to EBITDA growth and normalization of capital expenditures. According to Fitch Ratings, there are still some risks of postponement of the project, which puts pressure on the standalone creditworthiness assessment (SCP) of Uzmetkombinat JSC and is taken into account in determining the rating outlook. Management of Uzmetkombinat JSC notes that given the scale and complexity of the project, as well as the uniqueness of the technology used for the Uzbek market, assesses the progress of construction as satisfactory and does not expect significant deviations from the current project completion dates.
Nevertheless, the Company's SCP remains at “b+”, which, in addition to financial factors reflects the projected growth in the Company's size after project implementation, the Company's strong position in the domestic market of Uzbekistan, the relatively low cost of production, and the potential for further improvement in corporate governance practices.
According to the Fitch Ratings report, the implementation of the project to build the Foundry and Rolling Complex on schedule, improved liquidity, as well as a steady decline in the Total Debt/EBITDA ratio to below 3x could lead to a revision of the outlook to stable.
For more information, please visit the official Fitch Ratings website at https://www.fitchratings.com/research/corporate-finance/fitch-revises-uzbek-metallurgical-plant-outlook-to-negative-affirms-idr-at-bb-29-02-2024
Reference: Fitch Ratings is one of the three leading international rating agencies, along with Moody's and Standard & Poors. It was founded in 1913 and is headquartered in New York State (USA).
Note:
JSC Uzmetkombinat (JSC UZMK) is the leader of ferrous metallurgy in Uzbekistan, counting its history from 1944. Its manufacturing plant has an installed annual capacity of more than 1 million tons of rolled products and is implementing a large-scale investment program to increase capacity to 2.2 million tons per year during 2021-2025. The enterprise employs more than 11,000 people. Its products are sold in all regions of the country and are exported to various countries of the world, including Europe. More than 90% of the company's shares are owned by the Uzbekistan state. A significant portion of the company’s shares is traded on RSE “Toshkent”. Common and preferred shares of the company have the status of highly liquid.
According to the Fitch Ratings report, the revision of the outlook on the Company's rating is due to an increase in the level of debt burden in 2023-2024 beyond the expected level on the background of peak capital expenditures for the construction of the Foundry and Rolling Complex, coinciding with deteriorating market conditions and a temporary increase in production costs.
Currently, Uzmetkombinat JSC is at the final stage of realization of the project construction of the Foundry and Rolling Complex. The project will double the total capacity of finished products to 2.2 mln tons per year and should be commissioned in 2025, which, according to Fitch Ratings' expectations, will lead to a significant reduction in the company's debt burden in 2025 and subsequent years due to EBITDA growth and normalization of capital expenditures. According to Fitch Ratings, there are still some risks of postponement of the project, which puts pressure on the standalone creditworthiness assessment (SCP) of Uzmetkombinat JSC and is taken into account in determining the rating outlook. Management of Uzmetkombinat JSC notes that given the scale and complexity of the project, as well as the uniqueness of the technology used for the Uzbek market, assesses the progress of construction as satisfactory and does not expect significant deviations from the current project completion dates.
Nevertheless, the Company's SCP remains at “b+”, which, in addition to financial factors reflects the projected growth in the Company's size after project implementation, the Company's strong position in the domestic market of Uzbekistan, the relatively low cost of production, and the potential for further improvement in corporate governance practices.
According to the Fitch Ratings report, the implementation of the project to build the Foundry and Rolling Complex on schedule, improved liquidity, as well as a steady decline in the Total Debt/EBITDA ratio to below 3x could lead to a revision of the outlook to stable.
For more information, please visit the official Fitch Ratings website at https://www.fitchratings.com/research/corporate-finance/fitch-revises-uzbek-metallurgical-plant-outlook-to-negative-affirms-idr-at-bb-29-02-2024
Reference: Fitch Ratings is one of the three leading international rating agencies, along with Moody's and Standard & Poors. It was founded in 1913 and is headquartered in New York State (USA).
Note:
JSC Uzmetkombinat (JSC UZMK) is the leader of ferrous metallurgy in Uzbekistan, counting its history from 1944. Its manufacturing plant has an installed annual capacity of more than 1 million tons of rolled products and is implementing a large-scale investment program to increase capacity to 2.2 million tons per year during 2021-2025. The enterprise employs more than 11,000 people. Its products are sold in all regions of the country and are exported to various countries of the world, including Europe. More than 90% of the company's shares are owned by the Uzbekistan state. A significant portion of the company’s shares is traded on RSE “Toshkent”. Common and preferred shares of the company have the status of highly liquid.
