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Investing.com -- Fitch Ratings has lowered the Long-Term Foreign-Currency Issuer Default Ratings (IDRs) of PTT Global Chemical Public Company Limited (PTTGC) to 'BBB-' from 'BBB'. The National Long-Term Rating was also downgraded to 'AA-(tha)' from 'AA(tha)'. However, the outlook remains stable and the National Short-Term Rating was affirmed at 'F1+(tha)'.
The downgrade is due to Fitch's anticipation of higher leverage for PTTGC over the next two years, given a slower-than-expected recovery in earnings amid a prolonged downcycle in the petrochemical industry. The agency expects that spreads for petrochemical products will stay weak in 2025, influenced by slower demand growth and new capacity supply. Even with a slight recovery in earnings and lower capital expenditure in 2025, Fitch predicts that PTTGC's EBITDA net leverage will remain high and rating headroom will be limited.
PTTGC's rating includes a two-notch uplift from its Standalone Credit Profile (SCP), which has been revised down from 'bb+'/'a+(tha)' to 'bb'/'a(tha)'. This uplift reflects Fitch's belief that PTTGC's parent company, PTT Public Company Limited (PTT, BBB+/AAA(tha)/Stable), has medium strategic and operational incentives to provide support. The ratings also consider PTTGC's position as a leading petrochemical company in the region, its cost-competitive feedstock supply, and product offtake agreements with its parent.
Fitch's key assumptions within their rating case for PTTGC include a benchmark Brent crude price at $70/barrel in 2025, gradually reducing to $60 by 2029. The agency expects the profitability of petrochemicals to remain under pressure in 2025 due to new supply and weak demand. Gross refining margin, excluding inventory gains/losses, is expected to recover from 2025 onwards. Total (EPA:TTEF) capital expenditure and investment are projected to be around THB62 billion over 2025-2027.
The ratings could be negatively affected if the company fails to reduce EBITDA net leverage to below 4x consistently or if there is a perceived weakening of incentives for PTT to support PTTGC. Conversely, positive rating action could occur if EBITDA net leverage improves to below 3x on a sustained basis or if there are perceived stronger incentives for PTT to support PTTGC.
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