China Steel credit rating cut due to high-risk profile

By Kevin Chen  /  Staff reporter

Tue, Apr 30, 2013 - Page 14

China Steel Corp (中鋼) yesterday saw its credit ratings cut by a local ratings agency amid concerns over the Taiwanese company’s financial risk profile in the next one to two years, the agency said.

The nation’s only integrated steelmaker is now ranked “twAA” by Taiwan Ratings Corp (中華信評) for both its long-term corporate credit rating and unsecured corporate bond issue rating, down from the “twAA” rating it received in June last year.

“The downgrade reflects our view that the company’s financial risk profile will remain well below our expectations for a ‘twAA’ stand-alone credit profile in the next two years,” Taiwan Ratings, the local arm of Standard & Poor’s, said in a press release.

China Steel last week said its pretax net profit reached NT$5.68 billion (US$190.6 million) for the first three months of the year, compared with a net loss of NT$382.51 million a year earlier.

Taiwan Ratings forecast China Steel would return to slight profitability this year and next year, amid improved demand for its products.

Nonetheless, the agency said persistent overproduction in China, rising competition in Northeast Asia and high raw material costs would continue to weigh on the firm’s profitability over the next year.

Also, the firm’s high capital expenditure for mine acquisitions and overseas expansion would keep its debt level high over the next two years, the agency said. However, it gave a “stable” outlook for China Steel’s long-term ratings, so it is unlikely to downgrade the firm soon.