S&P Downgrades Chalco's (SHA:601600, HKG:2600) Long-term Rating to BBB


Standard & Poor's Ratings Services said today that it lowered its foreign currency long-term corporate credit rating on China-based aluminum producer Aluminum Corporation of China Ltd. (SHA:601600, HKG:2600) (Chalco) to "BBB" from "BBB+". The outlook on the corporate credit rating is negative. The ratings firm also lowered its Greater China credit scale rating on Chalco to "cnA-/--" from "cnA+/--".

"We downgraded Chalco to reflect the company's worse-than-expected financial performance in the fourth quarter of 2011 and our view that aluminum prices are likely to remain subdued in 2012 due to uncertainty in the global economy," said Standard & Poor's credit analyst Lawrence Lu. "As Chalco's production costs remain high, we see little likelihood that the company will be able to improve its cash flow coverage measures or reduce its high debt levels while its profitability remains low."

The ratings firm says that it expects "Chalco's cash flow coverage to remain very weak for its rating category in 2012. For example, we estimate its ratio of funds from operations (FFO) to total adjusted debt may be as low as 5%-6%. Chalco's debt level remains high compared with peers. Its ratio of debt to capital was about 57% as of Sept. 30, 2011. We don't expect any meaningful debt reduction in the coming year because the company still has large capital expansion plans. We project Chalco will continue to generate sizable negative free operating cash flow in the next couple of years at least, even if profitability improves somewhat."


2005-2011 www.researchinchina.com All Rights Reserved 京ICP备05069564号-1