MUMBAI (Thomson Financial) - Fitch Ratings affirmed Thailand's largest
olefins producer PTT Chemical Public Company Ltd.'s (PTTCH) ratings at national
long-term 'A+(tha)' and national short-term 'F1(tha)'. The outlook for the
national long-term rating is stable.
The ratings agency also affirmed the ratings for PTTCH's outstanding senior
unsecured debentures at 'A+(tha)' and outstanding secured debentures at
'AA-(tha)'.
The ratings are based on the high level of business and operational
integration with PTTCH's major shareholder, PTT Public Company Ltd., as PTTCH is
PTT's main gas-based olefins arm and has a favourable feedstock arrangement and
product off-take agreement with PTT, Fitch said.
The ratings also reflect the company's large scale of operation with an
increasing level of production integration via downstream units, which should
help support earnings growth and reduce earnings volatility in the longer-term.
But they also reflect the company's sizeable investment plan amid a less
favourable operating environment and relatively high exposure to a single
market.
Fitch added the ratings are also underpinned by PTTCH's strong financial
position and liquidity profile, providing financial flexibility despite a period
of major capacity expansion.
However, PTTCH's credit profile is tempered by its high vulnerability to the
cyclicality of the petrochemical business.
PTTCH is also exposed to execution risks from its new, planned projects,
Fitch noted.
The rating agency said the stable outlook is based on the expectations that
the improving economies of scale through upstream expansions, the increased
production integration via downstream expansions and the favourable feedstock
arrangements should help maintain PTTCH's cost competitiveness.
Fitch also said it expects this to reduce volatility risk during a less
favourable industry cycle and keep its financial leverage consistent with the
current credit metric.
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