Fitch upgrades ratings of Severstal, NLMK, MMK to BBB from BBB-, outlook stable
LONDON. April 9 (Interfax) - Fitch, the international rating agency, has upgraded the long-term issuer default ratings (IDR) of Russian steelmakers Severstal , NLMK Group and Magnitogorsk Iron & Steel Works (MMK) to BBB from BBB-.
The outlook for the ratings is stable.
The rating upgrade for Severstal reflects the company's "tested conservative financial policy during the supply-driven steel price turbulence in 2016-2017 and increasing protectionism since 2018," Fitch said in a press release.
"[Severstal's] strong financial profile has been driven by very low steel-making costs underpinned by its integration in iron ore and coal, focus on high-value added products with over a 45% share in sales, and modest capex. This has allowed Severstal to repay around $1 billion over the last three years and achieve one of the lowest leverage levels in the industry with a funds from operations (FFO) adjusted gross leverage of 0.8x at end-2018," Fitch said.
NLMK's upgrade also reflects the company's "tested conservative financial policy during the supply-driven price turbulence in 2016-2017 and increased protectionism since 2018," Fitch said.
Fitch expects both Severstal and NLMK to maintain their conservative financial profile despite a conservative outlook for steel prices, and temporarily elevated dividends driving negative free cash flow until 2021.