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Investing.com -- Fitch Ratings has downgraded Orbia Advance Corporation’s long-term ratings to ’BBB-’ from ’BBB’ while maintaining a Stable outlook, citing expectations that the company’s net leverage will remain above 3.0x during 2025-2027.
The rating agency had previously projected leverage would fall to 2.5x or below throughout the rating horizon. Fitch now forecasts Orbia’s net leverage to approach 4.2x in 2025, gradually declining to approximately 3.5x in 2026 and 3x in 2027.
The downgrade reflects a slower-than-anticipated recovery in EBITDA due to weak pricing and spreads in the polyvinyl chloride (PVC) market. Fitch expects net debt to remain close to $4 billion or slightly lower, including letters of credit.
Orbia’s operating performance continues to face challenges from market dynamics in the global chemical sector. Recovery in the Polymer Solutions and Building and Infrastructure businesses remains uncertain due to the prolonged downcycle in PVC prices and subdued construction demand in key markets, including Mexico and Western Europe.
Fitch projects Orbia’s EBITDA (pre-IFRS 16) to be around $1 billion in 2025, increasing towards $1.2 billion in 2026-2027. The company’s cash from operations is expected to reach close to $600 million for 2026-2027, while free cash flow should reach around $200 million.
The PVC market continues to face supply-demand imbalances, particularly from China and the U.S. Capacity rationalization has not occurred at the necessary pace to normalize oversupply. High interest rates and uncertainty in trade policies continue to delay recovery in construction and infrastructure sectors.
Despite these challenges, Orbia maintains a strong business position with vertical integration in its operations, managing resources from salt mines and fluorspar mines to production of final goods. The company has a strong presence in the PVC pipes sector across Latin America and Europe.
As of fiscal year 2024, Orbia’s main markets by revenues were North America with 36%, followed by Europe with 31%, South America with 20%, while Asia, Africa and others represented 13%.
Fitch noted that Orbia is well positioned relative to peers such as Alpek, S.A.B. de C.V. and Braskem S.A. in terms of product and geographic diversification. However, its ratings are tempered by material exposure to volatile industries and high leverage relative to peers.
Factors that could lead to a further downgrade include persistent deterioration in operating performance, sustained negative free cash flow generation, or EBITDA net leverage remaining above 3.5x long-term. An upgrade could occur with operating performance recovery above Fitch’s expectations or EBITDA net leverage at or below 2.5x long-term.
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