Standard & Poor’s Ratings Services has assigned its ‘BB-‘ long-term corporate credit rating to Russia-based vertically integrated aluminum company Sual International. The outlook is stable.
At the same time, Standard & Poor’s assigned its ‘ruAA-‘ Russia national scale rating to Sual.
“The key positive rating factors are Sual’s low cost position and self-sufficiency in bauxite and alumina, which support profitability and cash flow generation through the cycle,” says Standard & Poor’s credit analyst Elena Anankina. “The rating is constrained by Sual’s ambitious investment plans, exposure to aluminum price fluctuations, and by the risks of operating in Russia where most of the company’s cash-generating assets are based.”
Sual is a midsize aluminium company. In 2004, revenues totalled US$2bn (including 70% export) and Ebitda stood at US$425mn on 1mn tonnes of primary aluminium. The company benefits from a diversified production base of five smelters, three facilities combining alumina refining and smelting, and two bauxite mines. On December 31, 2004, total debt was US$679mn (including US$55mn in redeemable preferred shares).
“We consider that the company will likely retain its cost advantage, as Sual’s low cost position results in part from the location of its assets,” adds Anankina.
Standard & Poor’s will monitor how the uncertainties related to the ongoing reform of Russia’s electricity and railway sectors affect Sual’s cost position, and whether the company’s strategy of actively managing electricity price risks through investment will prove successful.
We will also track Sual’s progress in its investment program and financing. No significant debt-financed acquisitions are factored into the current rating and outlook.