Fitch rates Shanshui notes BB-

Fitch Ratings said it assigned a BB- long-term foreign-currency issuer default rating and a BB- foreign-currency senior rating to China Shanshui Cement Group Ltd. and an expected rating of BB- to the proposed dollar-denominated senior notes.

Shanshui's ratings are constrained by its relatively aggressive financial profile, with a high leverage level of around 2.5 times in the past three years, Fitch said.

Higher leverage coupled with lower historical profit margin, relative to some peers, means Shanshui may be more affected by any major fall in demand, the agency added. The company's capex will remain high over the next few years as it expands to new markets in Shanxi, Inner Mongolia and Xinjiang.

Shanshui's ratings consider its relatively strong market position in its core Shandong market, which contributed to 80% of its 2010 revenue and almost all of its profit, as well as its position as one of 12 Chinese cement companies supported by the state, the agency said.

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