Fitch upgrades Sinochem International to ’A-’ with stable outlook

Investing.com -- Fitch Ratings has upgraded Sinochem International Corporation’s (SIC) Long-Term Foreign-Currency Issuer Default Rating and senior unsecured rating to ’A-’ from ’BBB+’, while maintaining a Stable outlook.

The upgrade follows Fitch’s reassessment of the contagion risk from a potential default by SIC’s parent company, Sinochem Holdings Corporation Ltd., which has been elevated from ’Strong’ to ’Very Strong’. Sinochem Holdings is considered one of China’s most internationally active state-owned entities with significant overseas exposure in both assets and liabilities.

SIC is 54.61% indirectly owned by Sinochem Holdings through Sinochem Group and Sinochem Corporation, which are wholly owned subsidiaries of Sinochem Holdings. The rating agency applies a top-down approach under its Parent and Subsidiary Linkage Rating Criteria, reflecting ’Low’ legal, ’Medium’ strategic, and ’High’ operational incentives for Sinochem Holdings to provide support.

Fitch highlighted that Sinochem Holdings plays a pivotal role in China’s supply of agrochemical and high-end new chemical materials, and is responsible for research and development in the country’s seed and fertilizer sector. The company is also tasked with enhancing seed and food supply stability and rural prosperity.

The Chinese government maintains strong oversight of Sinochem Holdings, directly appointing its directors and senior management while providing substantial support through capital injections and subsidies.

SIC’s planned acquisition of 100% of Nantong Xingchen from Bluestar Group is expected to strengthen its position as Sinochem Holdings’ core materials science platform. Nantong Xingchen is a leading Chinese producer of epoxy resin and engineering plastics.

Fitch projects SIC’s financial position to improve in the coming years, with net EBITDA leverage expected to decrease from its 2024 peak. The rating agency forecasts capital expenditure to reduce to CNY1.1 billion-1.5 billion annually in 2025-2027, down from more than CNY8 billion in 2021-2022, as most of SIC’s expansion projects were completed by 2024.

The rating could face downward pressure from a negative rating action on the Chinese sovereign, decreased likelihood of state support to Sinochem Holdings, or weakening linkages between SIC and its parent company.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.