Moody’s upgraded ERG’s the corporate rating from “B3” to “B2”, the outlook is “positive. The ratio of debt to EBITDA decreased to 3.7x as of the end of 2017 from 6.1x a year earlier, and the coverage ratio of interest payments increased to 2.5x from 1.3x.
The improvement is due to higher EBITDA, which increased to $2.1-billion in 2017 from $1.2-billion in 2016.
“EBITDA growth was due to higher commodity prices, especially for ferroalloys and copper, as well as improved operating performance, which more than compensated for the strengthening of the average tenge-to-dollar exchange rate to 326 from 342 tenge against $ 1, or 5%,” Moody’s wrote.
Moody’s expects that EBITDA decrease slightly in 2018 – up to $2-billion. According to the agency, the growth in sales volumes of the company’s main products, including ferroalloys, will be balanced by a decrease in average prices for some products and increased costs. Moody’s also expects that the total debt of ERG will grow to $8.1-billion from the current $7.8-billion.
“As a result, the debt to EBITDA ratio will increase to 4.1x, and the coverage ratio of interest payments will decrease to 1.9x as of the end of 2018,” the agency notes.
According to Moody’s estimates, as of June 30, 2018 the liquidity of ERG was more than $570-million in unlimited cash and cash equivalents and more than $1.2-billion in cash flow from operating activities that the rating agency expects the company to generate over the next 12 months.