MOSCOW (MRC) -- Fitch Ratings (Thailand) has affirmed PTT Global Chemical Public Company Limited's (PTTGC) National Long-Term Rating and senior unsecured rating at 'AA+(tha)', the Outlook remains Negative, as per the agency's statement.
Fitch has also affirmed the National Short-Term Rating at 'F1+(tha)'. The rating actions follow the company's announcement that it intends to acquire Allnex Holding GmbH (Allnex) for EUR4.0 billion (THB148 billion) by end-2021 after obtaining regulatory and other necessary approvals.
The Negative Outlook reflects the risks that PTTGC's funds from operations (FFO) net leverage remains above our downgrade threshold of 2.5x beyond 2023 post-acquisition. Fitch sees the acquisition as credit accretive, aiding PTTGC's diversification into specialty products and new geographies. Fitch has consequently widened the financial metrics to FFO net leverage of 2.5x (from 2.0x earlier) to reflect the improvement in business profile. We expect PTTGC's FFO net leverage to fall below 2.5x by end-2023 from 3.8x in 2021 post-acquisition (2020: 4.1x).
The acquisition will be funded mainly by a shareholder loan (THB74 billion) from parent PTT Public Company Limited (PTT, BBB+/AAA(tha)/Stable), cash on hand (THB100.5 billion at end-1Q21) and the proceeds (THB23 billion) from the sale of a stake in associate Global Power Synergy Public Company Limited (GPSC, A+(tha)/Stable).
As MRC wrote previously, PTTGC abruptly shut down three crackers at its petrochemical complex in Map Ta Phut on 14 April 2021 after a thunderstorm caused a power outage. No. 1 and 4 crackers and the recently launched No. 5 cracker on the site were off-line for around one week. The production capacities of No. 1 and 4 crackers are 461,000 and 515,000 mt/year of ethylene, whereas the new cracker can produce 500,000 mt/year of ethylene and 260,000 mt/year of propylene.
Ethylene and propylene are the main feedstocks for the production of polyethylene (PE) and polypropylene (PP), respectively.
According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 1,176,860 tonnes in the first half of 2021, up by 5% year on year. Shipments of exclusively low density polyethylene (LDPE) decreased. At the same time, PP shipments to the Russian market were 727,160 tonnes in the first six months of 2021, up by 31% year on year. Supply of homopolymer PP and block-copolymers of propylene (PP block copolymers) increased. Supply of statistical copolymers of propylene (PP random copolymers) subsided.
PTT Global Chemical is a leading player in the petrochemical industry and owns several petrochemical facilities with a combined capacity of 8.45 million tonnes a year.
MRC