International credit ratings agency Fitch Ratings has announced that it has downgraded Indian steelmaker JSW Steel’s long-term credit rating to ‘BB’ from ‘BB+’, while the company’s outlook remains negative.
According to Fitch Ratings, the downgrade reflects the decline in profitability and the rise in leverage during a prolonged period of weak international steel prices, coupled with debt-funded investment in capacity expansion.
Meanwhile, for JSW Steel, Fitch expects 15 percent average sales volume growth in the financial years 2016-17 and 2017-18, and around five percent annually thereafter. Volume growth would be driven by recent capacity expansion and improving utilization rates. Fitch also expects the company’s EBITDA margin to improve to around 16-17 percent in the next two financial years compared to 14 percent recorded in the 2015-16 financial year.