Fitch upgrades Russian steel majors NLMK, MMK, Severstal
MOSCOW. May 19 (Interfax) - Fitch Ratings has raised the credit ratings of Novolipetsk Steel (NLMK) , Magnitogorsk Iron & Steel Works (MMK) and Severstal , the agency said in a press release.
The press release said: "The upgrades follow an industry review. The main driver of the upgrades was the improvement of companies' operational profiles. In Fitch's view, Russian steel market fundamentals remain strong. Companies would likely benefit from an expected increase of apparent steel consumption in Russia.
"Fitch notes NLMK's progress in balancing its 40% crude steel growth and re-rolling production capacities through the acquisition of the rolling assets of Steel Invest and Finance, previously a JV with Duferco. This decreases exposure to the volatile market of semi-finished steel products and ensures additional value will be delivered from its low cost upstream operations. Better sector exposure and geographic diversification will contribute to the stability of the company's future operational performance. Fitch views positively the company's commitment to its conservative financial strategy with target net debt/EBITDAR ratio below 1.0x and good practice of corporate governance compared with other Russian peers.
"The upgrade of MMK's ratings reflects the finalisation in 2011 of scaled investment projects (Rolling Mill 2000 and MMK-Atakas steel mill in Turkey) which will considerably strengthen the company's position as a producer of high value-added steel products and improves its geographic diversification of assets and revenues. Fitch expects MMK to have positive free cash flow from 2011 compared with negative free cash flow during 2007-2010, which will allow de-leveraging to net debt/EBITDAR below 1.4x by end-FY11.
"The upgrade of Severstal's ratings follows the sale of North American loss-making assets which substantially improves the company's credit metrics. However, uncertainty remains about the company's strategy for Lucchini s.p.a. Fitch expects Severstal to be able to maintain net debt/EBITDAR within 1.0x-1.2x range during FY11-FY12.
"The companies' ratings continue to be constrained by their exposure to the weak Russian business environment with the associated higher-than average political, business and regulatory risks.
"The rating actions are as follows:
NLMK:
Long-term (LT) Issuer Default Rating (IDR) upgraded to 'BBB-' from 'BB+'; Stable Outlook
Short-term (ST) IDR upgraded to 'F3' from 'B'
National LT Rating upgraded to 'AA+ (rus)' from 'AA (rus)'; Stable Outlook
MMK:
LT IDR upgraded to 'BB+' from 'BB'; Stable Outlook
ST IDR affirmed at 'B'
Local Currency LT IDR upgraded to 'BB+' from 'BB'; Stable Outlook
National LT rating upgraded to 'AA (rus)' from 'AA- (rus)'; Stable Outlook
Severstal:
LT IDR upgraded to 'BB-' from 'B+'; Stable Outlook
ST IDR affirmed at 'B'
Senior unsecured (SU) rating upgraded to 'BB-' (RR4) from 'B+'
Local currency LT IDR upgraded to 'BB-' from 'B+'; Stable Outlook
Local currency SU rating upgraded to 'BB-' (RR4) from 'B+'
National LT rating upgraded to 'A+ (rus)' from 'A (rus)'; Stable Outlook"