International credit rating agency Moody's has announced that it has upgraded the Turkish steel producer Erdemir's corporate family rating to Ba3, affirming the rating outlook as stable.
Moody's stated that the upgrade was prompted by ongoing improvements in Erdemir's operating performance and credit metrics in 2013, benefiting from strong industrial activities in Turkey. The strong performance was achieved in a depressed pricing environment, with higher revenues and a continuation of strong operating margins.
According to Moody's, Erdemir's current credit rating reflects the volatility of the steel industry, industry overcapacity in the mature European markets and Erdemir's relatively high dependence on iron ore and coking coal supplied by third parties, which could squeeze margins if prices for these raw materials remain high relative to steel selling prices. The rating agency added that the company's production is primarily based in Turkey where it operates two integrated steel plants in the cities of Eregli and Iskenderun. This concentration of production exposes Erdemir to some operational risks.
In light of Erdemir's creditworthiness and its strong relationship with Turkish and international banks, Moody's does not foresee any refinancing issues if and when the company decides to refund its debt maturities.