Magnitogorsk Iron & Steel Works (MMK) is pleased to announce that on May 23, the rating agency Fitch Ratings revised the outlook on its long-term issuer default rating (IDR) to positive from stable and affirmed the IDR at ‘BB+’.
In its press-release Fitch notes that the positive outlook reflects MMK’s strong financial performance which allowed MMK in 2015 to reduce FFO adjusted gross leverage to around 1.3x, mainly through debt repayments. In addition to a strong financial profile, MMK’s ratings also reflect its strong position on the Russian market as a supplier of a wide range of high value-added steel products.
Fitch also expects MMK to further decrease its debt in 2016 which will off-set the lower FFO, due to lower steel prices and challenging operating environment in Russia. In 2015, the company was able to reduce leverage to 1.3x from 1.8x in 2014 mainly due to a decrease in financial debt by $0.7 billion to $1.8 billion by end-2015 from $2.6 billion at end-2014. In 2015 MMK group also improved its cash position resulting in FFO adjusted net leverage decreasing by 0.6x.
Fitch sees the company’s capex to be between $400 and $550 million per annum for the next 3 years as the company does not have any material investment needs. Fitch expects the average dividend pay-out for the next three years to be around 2x higher than the last three years as the improved financial profile of the company allows it to support a higher dividend pay-out.
Fitch assessed MMK’s liquidity position as adequate with $244 million of cash in hand, $433 million of short-term investments and $1.2 billion of committed unutilized credit lines compared with $0.8 billion of short-term borrowings on March 31. (MMK/Ukrainian metal)