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Xinhua Far East Changes the Rating Outlook of Chongqing Stee

编辑:918 日期:2018-10-08


HONG KONG, May 30 /Xinhua-PRNewswire/ -- Xinhua Far East 网易财经China Ratings today changed the rating outlook for Chongqing Iron & Steel Co Ltd ("Chongqing Steel" or "the Company", SH A 601005, HK 1053) from negative to stable. Its domestic currency issuer credit rating remains unchanged at BBB.

(Logo: /uploads/allimg/180930/20180930153947wmjtp2y4sxm41486.JPG )

The outlook change was prompted by the company's improved financial structure resulting from the completion of A shares re-issue in the Shanghai market and following a recovery in China's steel industry since February 2006. The change also reflects our positive views about the company's planned new projects which are expected to optimize its manufacturing process and improve its profitability. Even so, the cyclical nature of the industry and the company's relatively small scale prevent it from obtaining a higher rating at this time.

Since February 2006, China's steel industry has AAAAAAAne a recovery, with strong domestic demand and sharp growth in exports. The price index for domestic steel products rose from 77 on January 1, 2006, to 103 on May 17 this year. Our forecasts are that demand for steel will grow on average by 13% a year between 2007 and 2010. Despite recent cuts to export tax rebates, the domestic steel industry should expand steadily over the period, benefiting from growing domestic demand, rising exports and controls on new capacity, without the risk of a serious over-supply.

Following the completion of A shares re-issue in the Shanghai market on February 28, in which RMB1 billion was raised, the company's gross debt to total capital ratio dropped from 42.4% in 2006 to 37.2% in the first quarter of 2007. The company plans to invest in new projects with total forecast capital expenditure of RMB2 billion. These include: an 800,000-ton hot-rolled steel coin project; phase II of a 500,000-ton cold-rolled thin plates project; and a 143,000-ton galvanization plates project.

In Xinhua Far East's opinion, these new projects will optimize its manufacturing processes and improve its profitability, without boosting its debt ratios significantly. The company's core product is its medium-gauge steel plating, which contributed to 43.7% of total revenue and 86.2% of gross profit in 2006. The addition of further products would diversify the company's product concentration risks. Besides, as Chongqing is the largest motorcycle manufacturing base and an important auto manufacturing base, the Company's increased cold-rolled thin plate capacity can be absorbeAAAAAAAA> In December 2004, Chongqing Steel started operating phase I of its cold-rolled thin plates project, reporting a gross margin of -14% in 2006 due to the high cost of outsourcing hot-rolled thin plates. The planned construction of its 800,000-ton hot-rolled steel coin project iAAAApected to improve the company's profitability.

However, the cyclical nature of the steel industry, the company's relatively small scale of operation, uncertainties surrounding the construction of new projects, and the liquidity risks related to its higher proportion of short-term debt, prevent it from obtaining a higher rating at this time.

Chongqing Steel mainly produces steel plates, steel sections and wire rods, with steel plates (mainly used for shipbuilding, boilers and pressure vessel) the biggest contributor to revenue and profit. In 2006, the company produced 2.88 million tons of steel products, 58% of which was sold in China's south-west.

For the rating report summary, please visit http://www.xinhuafinance.com/creditrating .

Note to Editors:

About Xinhua Far East China Ratings

Xinhua Far East China Ratings (Xinhua Far East) is a pioneering venture in China that aims to rank credit risks among corporations in China. It is a strategic alliance between Xinhua Finance (TSE Mothers: 9399), and Shanghai Far East Credit Rating Co., Ltd. Shanghai Far East became a Xinhua Finance partner company in 2003 and the first China member of The Association of Credit Rating Agencies in Asia in December 2003.

Capitalizing on the synergy between Xinhua Finance and Shanghai Far East, Xinhua Far East's rating methodology and process blend unique local market knowledge with international rating standards. Xinhua Far East is committed to provide investors with independent, objective, timely and forward-looking credit opinions on Chinese companies. It aims to help investors differentiate the credit risks among the corporations in China, thereby, cultivating their awareness and promoting information disclosures and transparency in China market. For more information, see http://www.xfn.com/creditrating .

About Xinhua Finance LimiteAAAAAAA> Xinhua Finance Limited is China's premier financial information and media service provider and is listed on the Mothers Board of the Tokyo Stock Exchange (symbol: 9399) (OTC ADRs: XHFNY). Bridging China's financial markets and the world, Xinhua Finance serves financial institutions, corporations and re-distributors through five focused and complementary service lines: Indices, Ratings, Financial News, Investor Relations, and Distribution. Founded in November 1999, the Company is headquartered in Shanghai, with offices and news bureaus spanning 14 countries worldwide.

For more information, please visit http://www.xinhuafinance.com .

About Shanghai Far East Credit Rating Co., LtAAAAAAA> Shanghai Far East Credit Rating Co., Ltd. is the first and leading professional credit rating company with comprehensive business coverage in China. It is an independent agency established by the Shanghai Academy of Social Sciences with the mission to develop internationally accepted standards for capital market in China. The company is a pioneer in conducting bond-rating business in China. For years, it has been authorized by the Shanghai branch of the PBOC to undertake loan certificate credit rating.

Since establishment, it has rated over 1,000 corporate long-term bonds and commercial AAAAAs, based on the principles of objectivity, fairness and independence. The company has also maintained over 50% market share in the loan certificate-rating sector in Shanghai for three consecutive years. With its strong local presence and knowledge, it provides investors with unique and the most insightful credit opinion. For more information, see http://www.fareast-cr.com .