IQPlus, (04/08) - "The upgrade of Chandra Asri's CFR to Ba3 reflects the large and sustainable improvement in its margins, cash flow generation, financial leverage and liquidity profile since the completion of its cracker expansion project in late 2015," says Brian Grieser, a Moody's Vice President and Senior Credit Officer.
The cracker expansion project added significant ethylene and propylene capacity in 2016. Moody's expects the improved operating leverage from this capacity and other ongoing projects to result in more resilient margins and cash flow generation during downturns in the petrochemical cycle.
Moody's says that product spreads should tighten over the next two years, given the likely growth in global petrochemical capacity. Nevertheless, the spread between Chandra Asri's key olefin and polyolefin products and its naphtha feedstock should remain at levels such that the company can maintain EBITDA margins of around 20% over the next 12 24 months, down from 28% for the 12-month period ended 31 March 2017.
"The Ba3 rating reflects the improvement in Chandra Asri's balance sheet, particularly its increased cash balances and lower debt levels, which when combined with substantially improved EBITDA generation, have lowered leverage to below 1.0x," added Grieser.
Chandra Asri has announced several large capital expenditure projects . including a butadiene plant expansion, a polypropylene plant debottlenecking, a naphtha cracker furnace revamp, a new polyethelene plant, a new MTBE and Butene-1 plant and a feasibility study into constructing a second naphtha cracker which could result in capital spending of roughly $1 billion over the next three years.(end)
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