Moody's raised Wanhua Chemical Group Co. Ltd.'s issuer rating to Baa2 from Baa3 and revised the outlook to stable from positive.
Danny Chan of Moody's said the upgrade reflects the company's improved market position, competitiveness and diversification following Wanhua's acquisition of its major shareholder in August for 52 billion Chinese yuan. The shareholder held 47.92% of Wanhua Chemical and 100% of its subsidiary BorsodChem Zrt.
"Wanhua Chemical's improved business fundamentals, diversification and strong financial profile will help it better weather cyclicality of its chemical products," Chan said.
The upgrade also reflects Moody's expectation that Wanhua will maintain its strong operating performance and continue to deleverage even at a time of tight supply-demand conditions over the next two to three years.
Specifically, Moody's expects the company's leverage to decline to between 0.8x and 0.9x over the next 12 to 18 months from 1.3x in 2017. In addition, the rating agency projects the company's pro forma operating cash flow to stay at or above 15 billion to 20 billion yuan per year for the next two years.