- (The following statement was released by the rating agency)
Sept 30 - Standard & Poor's Ratings Services said today that it revised its outlook on Germany-based cement producer HeidelbergCement AG (HC) to negative from stable. At the same time, the 'BBB-/A-3' long- and short-term corporate credit and all issue ratings were affirmed.
'The outlook revision reflects fresh concerns about covenant headroom; heavy refinancing needs, which will need to be addressed by mid-2010; our reassessment of the group's future prospects in light of its half-year results published in August; and increasingly negative news from a number of key mature markets in Europe, including the U.K., which compound ongoing severe conditions in the U.S.,' said Standard & Poor's credit analyst Xavier Buffon.
We consequently believe that HC's performance will fall short of our previous expectations; that the group's debt reduction and restoration of acceptable credit metrics will be slower than initially anticipated; and that headroom under financial covenants will become tight at year-end 2008 and through 2009.
The ratings on HC are supported by its strong market positions as a leading global player in heavy construction materials, extensive geographic and market diversity, and good profitability, which translate into solid cash flow generation. These strengths are offset by the group's aggressive financial policy and heavy debt burden stemming from the mostly debt-financed EUR14 billion acquisition of Hanson Ltd. in mid-2007, as well as high exposure to cyclical construction markets and heavy capital and energy intensiveness in the industry.
'The negative outlook indicates a risk of a downgrade if management fails to shore up covenant headroom issues, address refinancing issues well in advance of large maturities in 2010, and undertake necessary measures to complement internal cash flows if needed to steadily increase credit metrics and ultimately reach more adequate levels for the ratings,' said Mr. Buffon.
This includes a ratio of adjusted funds from operations (FFO) to debt of above 20% on a sustained basis.
Flat or slightly negative organic growth in 2009 and 2010, which could in itself stem from softening conditions in until-now strong emerging markets, and/or further negative news from mature markets, could make minimum acceptable credits metrics difficult to achieve. If, and when, we become convinced that minimum metrics cannot be attained, we could lower the ratings; that said, we will also take into consideration what management and shareholders undertake, and are able to achieve, on asset disposals, capital increases, and any other debt reduction measures.
Ratings information is available to subscribers of RatingsDirect, the real-time Web-based source for Standard & Poor's credit ratings, research, and risk analysis, at www.ratingsdirect.com. It can also be found on Standard & Poor's public Web site at www.standardandpoors.com; select your preferred country or region, then Ratings in the left navigation bar, followed by Credit Ratings Search. Alternatively, call one of the following Standard & Poor's numbers: Client Support Europe (44) 20-7176-7176; London Press Office (44) 20-7176-3605; Paris (33) 1-4420-6708; Frankfurt (49) 69-33-999-225; Stockholm (46) 8-440-5914; or Moscow (7) 495-783-4017. (New York Ratings Team) tf.TFN-Europe_newsdesk@thomsonreuters.com jlw COPYRIGHT Copyright Thomson Financial News Limited 2008. All rights reserved. The copying, republication or redistribution of Thomson Financial News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Financial News.
Sept 30 - Standard & Poor's Ratings Services said today that it revised its outlook on Germany-based cement producer HeidelbergCement AG (HC) to negative from stable. At the same time, the 'BBB-/A-3' long- and short-term corporate credit and all issue ratings were affirmed.
'The outlook revision reflects fresh concerns about covenant headroom; heavy refinancing needs, which will need to be addressed by mid-2010; our reassessment of the group's future prospects in light of its half-year results published in August; and increasingly negative news from a number of key mature markets in Europe, including the U.K., which compound ongoing severe conditions in the U.S.,' said Standard & Poor's credit analyst Xavier Buffon.
We consequently believe that HC's performance will fall short of our previous expectations; that the group's debt reduction and restoration of acceptable credit metrics will be slower than initially anticipated; and that headroom under financial covenants will become tight at year-end 2008 and through 2009.
The ratings on HC are supported by its strong market positions as a leading global player in heavy construction materials, extensive geographic and market diversity, and good profitability, which translate into solid cash flow generation. These strengths are offset by the group's aggressive financial policy and heavy debt burden stemming from the mostly debt-financed EUR14 billion acquisition of Hanson Ltd. in mid-2007, as well as high exposure to cyclical construction markets and heavy capital and energy intensiveness in the industry.
'The negative outlook indicates a risk of a downgrade if management fails to shore up covenant headroom issues, address refinancing issues well in advance of large maturities in 2010, and undertake necessary measures to complement internal cash flows if needed to steadily increase credit metrics and ultimately reach more adequate levels for the ratings,' said Mr. Buffon.
This includes a ratio of adjusted funds from operations (FFO) to debt of above 20% on a sustained basis.
Flat or slightly negative organic growth in 2009 and 2010, which could in itself stem from softening conditions in until-now strong emerging markets, and/or further negative news from mature markets, could make minimum acceptable credits metrics difficult to achieve. If, and when, we become convinced that minimum metrics cannot be attained, we could lower the ratings; that said, we will also take into consideration what management and shareholders undertake, and are able to achieve, on asset disposals, capital increases, and any other debt reduction measures.
Ratings information is available to subscribers of RatingsDirect, the real-time Web-based source for Standard & Poor's credit ratings, research, and risk analysis, at www.ratingsdirect.com. It can also be found on Standard & Poor's public Web site at www.standardandpoors.com; select your preferred country or region, then Ratings in the left navigation bar, followed by Credit Ratings Search. Alternatively, call one of the following Standard & Poor's numbers: Client Support Europe (44) 20-7176-7176; London Press Office (44) 20-7176-3605; Paris (33) 1-4420-6708; Frankfurt (49) 69-33-999-225; Stockholm (46) 8-440-5914; or Moscow (7) 495-783-4017. (New York Ratings Team) tf.TFN-Europe_newsdesk@thomsonreuters.com jlw COPYRIGHT Copyright Thomson Financial News Limited 2008. All rights reserved. The copying, republication or redistribution of Thomson Financial News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Financial News.