GCR has reaffirmed Mabati Rolling Mills’ (“MRM”) national scale KShs rating at A+ (single A plus) and A1 (single A one) in the long term and short term respectively. Additionally, the rating has also been placed on Positive Outlook, indicative of the strong performance over the review period.
MRM has reported a robust operating performance over the review period, despite significant currency and steel price volatility. Whilst revenue and operating profit have fluctuated somewhat, the group has consistently reported strong bottom line profitability. Although the interest charge rose substantially in F10, as the large cash balance was utilised to fund capex, net interest coverage remained firm at 5.7x. Notably, the group commissioned the new Cold Rolling Mill, as well as the upgraded Metal Coating Line during the year. The project was completed on time and within budget. With full capacity to be attained in F11, MRM expects revenue to increase 49% for the year.
Robust cash generation in F10 allowed the company to fund ongoing operations through internal cash reserves. Additionally, excess cash was utilised to settle all short term loans, with the remaining KShs2bn in debt relating solely to the note programme, which matures in October 2012. Accordingly, gearing metrics receded at FYE10 with net gearing registering at 31% (FYE09: 60%) and net debt to EBITDA 139% (FYE09: 154%). Borrowings are expected to remain stable in F11, with no new debt reflecting on the balance sheet. Accordingly, with growth in earnings, net gearing should improve to 12% at FYE11 (FYE10: 31%), while net debt to EBITDA is expected to register at 36% (FYE10: 107%).
Dominique Alberts https://globalratings.net/uploads/files/July_2011.pdf
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