Fitch Ratings has assigned the following ratings to Cempro:
Local currency IDR 'BB+'; foreign currency IDR 'BB+'; proposed up to US$300 million senior unsecured notes due up to 2023 'BB+(exp)'.
The Guatemalan cement market has grown at historical compound annual growth rate (CAGR) of 6.8% since 1950 and the ratings reflect the company's solid market position as the leader in Guatemala's cement industry with cement production capacity of 3.1 million t and a stable market share around 84%. For the period 2013 – 2016, Fitch projects negative free cash flow (FCF) for Cempro because of the construction of a new cement plant. The Stable Outlook reflects that Cempro will maintain a positive trend for its underlying cement operations during its current investment cycle.
High margins, moderate leverage and strong liquidity
The company has the highest EBITDA margins among public industry peers. The ratings include Fitch's expectation that Cempro will maintain EBITDA margins of around 36% during the next few years. Cempro's gross leverage as of 30 June 2013 was 2.4x and net leverage for the same period was 2.0x.
Cement operations expected to grow in next few years
The company is expected to continue to grow above Guatemala's GDP levels. Cempro's revenues were US$505.1 million during the LTM ended 30 June 2013, US$507.7 million during 2012 and US$501.1 million during 2011. The ratings incorporate the expectation that its revenue growth during 2013 will be around 0.4% and that sales volume will be about 2.3 million metric t.
Negative FCF during 2013 - 2016 driven by new plant Capex plan
During the year ended 30 June 2013, Cempro's FCF was negative US$71 million. The ratings incorporate the view that the company's operations will generate negative FCF during 2013 – 2016 due to spending on the new plant. The ratings incorporate expectations that the company's annual paid-dividend levels will be in the range of US$40 – 55 million during 2013 – 2016.
Cempro is planning to increase its cement production capacity by approximately 71% through the building of a new cement plant (San Gabriel) with a combination of cash, additional debt and its own cash flow generation. The plant is scheduled to start operations during the first quarter of 2017.
Edited from news source by Rosalie Starling
Read the article online at: https://www.worldcement.com/the-americas/22102013/new_ratings_assigned_to_cempro_in_guatemala_321/