Moody's raised Anhui Conch Cement Co. Ltd.'s issuer rating to A2 from A3 with a stable outlook and said it expects the company to maintain its leading market position, strong profitability and credit profile over the next two to three years.
Supply-side structural reforms in the Chinese cement industry led to favorable prices for cement producers including Anhui Conch, and Moody's expects a further expansion in the company's revenue scale with sustainable profitability.
"Anhui Conch has demonstrated a good track record of expanding its business scale, maintaining profitability and low debt leverage through the industry cycle, and exercising prudent financial management," Moody's said. "Such a situation has led to a resilient credit profile."
Moody's expects the company's debt-to-EBITDA ratio to rise slightly to about 0.5x over the next 12 to 18 months from about 0.3x in the 12 months that ended June 30. The level is strong for the company's current rating and provides a solid buffer against the cyclicality of the industry, according to the rating agency.
The upgrade also reflects Anhui Conch's track record of debt reduction, strong liquidity position, operational support from the Anhui provincial government, and the company's product concentration in clinker — a type of binding agent — and cement, which are subject to cyclical demand.