Fitch upgrades Fufeng

Fitch Ratings said it upgraded Fufeng Group Ltd.'s long-term foreign-currency issuer default rating and senior unsecured rating to BB+ from BB.

The outlook is stable.

The upgrades reflect improved profitability and lower leverage, Fitch said.

Fufeng's 2016 results also support the rating action with improving performance in the amino acid segment that was helped by industry consolidation, a more efficient production process for the core monosodium glutamate (MSG) product and increased contribution from other amino acid products, the agency said.

Fufeng is the largest producer of MSG globally and enjoys advantages, such as economies of scale, integrated facilities and proximity to raw materials, which competitors will find difficult to replicate, the agency said.

But the profitability of Fufeng's xanthan gum segment has continued to weaken due to greater competition and overall weakness in the oil and gas industry, a key customer base, Fitch said.

Fufeng also has lower leverage relative to peers and its free cash flow is likely to stay positive with lower capital expenditure requirements, the agency said.

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