Global credit rating agency Moody's said it has downgraded its rating for Brazil steelmaker Usiminas to Ba3 from Ba2 on a slower-than-expected recovery in Brazil's steel demand, it said. The outlook is stable.
“The downgrade reflects the deterioration in the company's credit metrics since 2Q14, and the low likelihood that profitability, cash flow and leverage metrics will improve in 2015 to levels appropriate for a Ba2 rating,” the agency said in its report.
Moody’s also noted Brazil’s current timid economic growth and its “continued struggling industrial activity (3.2 percent contraction through November 2014),” especially in steel consuming segments such as capital goods and the automotive industry.
For the agency, those factors “will continue to challenge the steel industry throughout the year.”
Moody’s said conditions for steel producers in Brazil will remain “challenging”, but “imports will not increase, further supported by current FX levels, and that Usiminas will prudently manage capital expenditures and dividend distributions in order to maintain adequate liquidity to service its financial obligations.”
Usiminas is Latin America’s largest integrated flat-steel producer, with production of 5.8 million tons of crude steel. It also owns several iron ore mining properties, steel distribution and capital goods subsidiaries in Brazil.