Moody’s ups Ciech CFR, notes to B1

Moody's Investors Service said it upgraded Ciech SA’s corporate family rating to B1 from B2, probability of default rating to B1-PD from B2-PD and instrument rating on the €245 million of senior secured notes issued by Ciech Group Financing AB due in 2019 to B1 from B2.

The outlook remains stable.

Moody’s said the upgrade follows the company's good performance in 2013 and so far in 2014 – with improvements in EBITDA margins and cash flow generation. The favorable results were driven by the increased volumes and price of soda ash and sales of plant protection chemicals as well as the disposal of lower margin businesses.

Consequently, for the 2013 fiscal year, Moody's adjusted EBITDA margin improved to 11.7% and for the last 12 months (LTM) ended September was 14.7%. Additionally, debt/EBITDA declined to 3.3 times in fiscal year 2013 and was 2.6 times for the LTM ended September with free cash flow/debt between 7%-9% (ratios adjusted with Moody's standard adjustments).

These credit metrics met the agency’s upgrade triggers and now solidly position the company in the B1 rating category.

Moody’s said the action also incorporates its view that current profitability levels will be at least maintained throughout 2015, supported by trends in the soda ash market, including Ciech's own capacity expansion and growth in its plant protection chemicals business.

However, the company has a large capital expenditure program in 2015 and 2016 of about PLN 900 million that the agency expects will result in negative free cash flow and debt/EBITDA rising to roughly 3.5 times.

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