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Alrosa Gets Improved Rating from S&P
Jul 9, 2017 9:26 AM
By Rapaport News
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RAPAPORT... Standard & Poor’s (S&P) raised its credit rating
for Alrosa, predicting the Russian miner would withstand potential threats such
as pressure on rough-diamond prices and volatility inherent to the industry.
The agency’s long-term corporate credit rating for Alrosa
is now “BB+,” compared with its previous assessment of “BB,” S&P said
Thursday.
The move reflects S&P’s view that Alrosa will maintain
low debt levels and positive “free operating cash flow” — meaning there is a good chance it will be able to fund expansion without needing loans. As such, the agency
also adjusted Alrosa’s financial-risk profile upward to “modest” from
“intermediate.”
Alrosa’s relatively high profitability, along with its “solid
global market share and sound reserve base,” justify a business-risk rating of
“fair,” S&P added. But the organization’s view of Russia as a high-risk
country worked against the miner, as did the relatively high concentration of
its customer base — meaning it gets a lot of revenue from a small number of
clients.
“We think that Alrosa’s business-risk profile assessment
is similar to those of its peers from the Russian mining and
steel-making sector, including NLMK, Severstal, Polyus Gold and Evraz Group,
and stronger than those of international diamond miners such
as Petra Diamonds,” the organization said.
However, as a single-commodity producer, Alrosa operates
in a market that is more susceptible to external shocks and changes in consumer
confidence than the rest of the mining sector, S&P explained.
S&P worked under the assumption that Alrosa’s diamond
production would increase 3% to 5% this year, followed by stable output from
2018. It also assumed diamond prices for 2017 would decline slightly from last
year, before going flat. |
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Tags:
Alrosa, credit ratings, mining, Rapaport News, Russia, S&P, standard & poor's
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