Fitch Ratings has affirmed Turkish steel exporter Habas’ Senior Unsecured local currency rating at B+ with a Stable Outlook and Senior Unsecured foreign currency rating at B with a Positive Outlook. At the same time, the agency has affirmed Habas' National rating at A+.
Habas is one of the three largest long steel exporters in Turkey and an active player in industrial and medicinal gas (IMG). It also has some interests in banking.
The affirmation reflects Habas' good business mix, its strong local market position in IMG, an area with strong growth potential, which helps to buffer the company's earnings during severe steel price volatility.
The ratings also take into account the company's conservative financial structure, lower cost base and wide geographical coverage in the international steel and domestic IMG markets, as well as its solid distribution network. The ratings also benefit from Habas' export activities, which not only help the company establish an international presence but also provide a hedge against foreign currency volatility.
On the other hand, Fitch remains concerned about Habas' slight pick up in leverage, cash investment policies, and the possibility of prolonged TRL appreciation, as well as increased protectionism in the steel industry and banking sector volatility.
The low level of profitability induced by a stronger TRL, and possible continued working capital outflow to finance bigger scale operations, could have a negative effect on the company's creditor protection measures. The ratings are constrained by the capital intensive and cyclical nature of the steel sector and the over supply facing it.
Habas posted negative net free cash flow in the past three years mainly due to investments into new IMG and electricity generation plants, and existing plant upgrades.
Although Habas has seen an increase in net leverage in the past two years, this has not led to a significant deterioration in creditor protection measures. De-leveraging commenced in in the second half of 2003, with Habas' net debt decreasing to $15 million in September 2003 from $32m in June 2003.
Habas was founded in 1956 and is 100 percent owned by the Basaran family. It is a member of Habas Group, whose activities include banking and finance, liquid petroleum gas distribution, and heavy machinery manufacturing. The company generated 83 percent of the Habas Group's consolidated sales in financial year 2002. — (menareport.com)
© 2003 Mena Report (www.menareport.com)
