Credit rating agency Standard and Poor’s (S&P) has affirmed both the global scale and national scale ratings of Brazilian flats producer Usiminas at B and brA+, respectively. The steelmaker’s outlook remains positive, according to the credit rating agency.
“The maintenance of the positive outlook reflects our expectation of a recovery in the company's operating performance in the next few quarters, which should enable it to increase free operating cash flows (FOCF) and to strengthen credit metrics gradually, despite higher investments,” S&P said.
The agency forecasted Usiminas to see EBITDA margins “gradually recover,” and such an improvement would result in positive cash flow generation, despite “higher investment levels, mainly for paying down debt.”
S&P said Brazil’s steel domestic demand should increase slightly, which would contribute to stronger margins for the Brazil-based steelmaker.
The still timid growth in domestic demand would be followed a “still-healthy premium over imported steel, which allows for price adjustments, as well as better sales mix and iron ore prices.”
“This will allow the company to start a new investment cycle for the next three years without pressuring its leverage,” the agency said.
“We believe these investments, mainly to improve asset efficiency, such as the modernization of a blast furnace at the Ipatinga plant and dry stacking process at the company's mining operations, will help heighten the operating performance's resilience,” S&P said.