Latin Amer Metals, Mining Well-Placed For Downturn -Fitch
09 Juni 2009 - 8:10PM
Dow Jones News
Latin American metal and mining companies are better positioned
than their global peers to withstand the pressures of the global
downturn, Fitch Ratings said in a report Tuesday.
Fitch said their relative strength is due to higher earnings
before interest, tax, depreciation and amortization, or EBITDA, as
well as funds from operating margins and their healthy cash
positions.
Comparing 2008 EBITDA margins, a key measure of profitability,
Fitch listed six Latin American metals and mining companies with
margins ranging between 24% and 55%, while outside the region only
Tata Steel (500470.BY) was within this range. Its EBITDA margin was
43%.
The top four Latin American companies in terms of EBITDA margin
in the iron and steel sector were the Brazilians: Samarco
Mineracao, CSN (SID), VALE SA (VALE), and Usiminas (USIM5.BR),
Fitch reported.
The region's metal and mining companies had certain
similarities, Fitch said, including strong capital structures,
ability to generate significant cash flow during cycle troughs and
manageable debt payment schedules.
According to Fitch, their strong liquidity positions have
limited debt refinancing needs and a consequent dearth of debt
capital markets activity in the first half of 2009, Fitch said.
This contrasts with a 'plethora of bond issuances outside the
region, by companies with higher refinancing needs,' Fitch
noted.
Among those global companies with bond issuances worth a total
of $22 billion between April and June, were Rio Tinto (RTP),
ArcelorMittal (MT), Anglo American (AA), Goldcorp and Teck
Resources.
"Defaults during the next 12 difficult months are unlikely, and
covenants, particularly those that tie cash flow to equity or
debts, could be breached by few companies," the report said.
-By John Kolodziejski; Dow Jones Newswires; 55-21-2586-8086;
john.kolodziejski@dowjones.com