South African rating agency GCR upgraded the company’s outlook from stable while retaining its long- and short-term ratings at A+ and A1.
Credit rating agency GCR has for the first time awarded Mabati Rolling Mills (MRM) a positive outlook following the company’s return to profit growth and reduction of debt level.
The South African rating agency upgraded the company’s outlook from stable while retaining its long- and short-term ratings at A+ and A1.
“Following the diminished performance in 2012 — associated with expensive inventories, product dumping by competitors and lower market prices — the company returned to profitable growth in 2013,” said GCR in a rating report dated this month.
“This combination of improved earnings and lower gearing led to the ratings being placed on a positive outlook.”
High costs
MRM was able to reduce its borrowings by Sh798 million leading to a lower gearing ratio of 60 per cent from 78 per cent a year earlier.
Data from the Kenya National Bureau of Statistics shows that production of galvanised sheets rose last year after a drop in 2012 which was attributed to slow down in the construction sector due to high financing costs.
Industry data shows 277,754 metric tonnes of galvanised sheets was produced last year, compared to 255,815 metric tonnes a year earlier, pushing up MRM sales eight per cent.
GCR notes that if the company is able to keep to its 2014 budget focussed at reducing borrowing and improving all credit-risk measures, it was likely to upgrade MRM’s rating.
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