HA NOI (VNS)— Standard&Poor's on Thursday lowered its long-term corporate credit rating for Viet Nam National Coal and Mineral Industries Holding Corporation (Vinacomin) from "Double B Minus" to "B Plus" – with a stable outlook.
|Vinacomin workers mine coal in the northern province of Quang Ninh. — VNA/VNS Photo Trong Dat
The ratings agency said the axBB long-term ASEAN regional scale rating on the corporation.
The downgrade reflected S&P's expectation that Vinacomin's financial risk profile would weaken due to the large capital spending and the declining profitability of the corporation's coal operation.
S&P forecast Vinacomin's debt-to-EBITDA ratio — the comparison of financial borrowings and earnings before interest, tax, depreciation and amortisation — would climb to more than 4.0x and its ratio of funds from operations (FFO) to debt to decline to about 15 per cent over the next two years from 2.8x and 24 per cent respectively last year.
It also lowered the corporation's stand-alone credit profile to b+ from bb-.
It expected that Vinacomin would spend VND10-11 trillion (US$500 million) a year in the period of 2012-14 to complete its power, alumina and non-coal minerals projects and expand coal production.
The forecast was VND15-20 trillion lower than Vinacomin's plan.
S&P believed that Vinacomin would continue to have negative free operating cash flows at least until 2014 and would raise debt ratio to fund its investments.
The rating agency also expected that the corporation's coal operations would be gradually less profitable and cash flow generative over the next two years.
This was because the corporation has sold a higher proportion of coal to the domestic market at prices which were lower than market ones.
S&P forecast annual EBITDA at about VND10-12 trillion next year and 2014 while FFO at VND7.5-9 trillion annually until 2014.
Vinacomin's EBITDA and cash flows for the second half of the year would be likely to remain weak following the decline in coal prices since May 2012. — VNS