Fitch Ratings has upgraded Turkish steel exporter Habas Sinai ve Tibbi Gazlar Istihsal Endustrisi AS’ senior unsecured local currency rating to B+ from B. The company's senior unsecured foreign currency rating has been affirmed at B. Following the rating action, the outlook is stable.
This rating action follows the completion of an annual review process. The upgrade in the ratings reflects continued strong performance in exports in 2001 which balances domestic steel and Industrial Medicinal Gases (IMG) operations, improved performance in 2002 and the completion of an extensive three-year investment program.
Habas' steel exports increased by 29 percent, generating a two percent year on year revenue growth in 2001. According to pro forma Turkish GAAP figures, Habas' exports revenues further increased by five percent and its total revenues increased by 10 percent to an expected $379 million due to both the global steel price improvement and the domestic market recovery in FY02.
The company's underlying credit positives include its strong local market position in IMG, which has the potential for growth through new product development and acts as a cushion during severe steel price fluctuations; its experienced management team, with over 45 years of operational experience in Turkey; its wide geographic coverage both in steel and IMG; and its solid distribution network.
However, the ratings are constrained by the inherent characteristics of steel operations, which are capital-intensive, over-supplied, price and demand-cyclical and subject to significant earnings and free cash flow fluctuations. Furthermore, remaining concerns include the expected volatile characteristics of future domestic steel and IMG consumption together with the volatile banking environment.
Habas increased its equity stake in Anadolubank to 67 percent from 12 percent in FY01 in line with the recapitalization of the banking industry following the Turkish financial crisis and subscribed 35 trillion Turkish liras ($21.4 million) to Anadolubank's rights issue in 2001. The inter-group transactions among the bank and the company are insignificant.
Habas' performance in exports, its ability to generate positive net free cash flow, continuation of its leading market position in the IMG sector and any anti-dumping actions specifically against the company will be among the other issues that the agency will focus on during its credit evaluation in the future.
Founded in 1956 and 100 percent owned by the Basaran family, Habas is one of the three largest long steel exporters in Turkey and is active in the domestic IMG sector. It is a member of Habas Group, whose activities also include banking and finance, liquid petroleum gas distribution, and heavy machinery manufacturing. It makes up the majority of the Habas Group, generating 87 percent of consolidated sales and 73 percent of pre-tax profit as of FY01. — (menareport.com)
© 2003 Mena Report (www.menareport.com)
