Fitch lowers West China Cement outlook to negative

Fitch Ratings said it revised West China Cement Ltd.'s outlook to negative from stable and affirmed its long-term foreign-currency issuer default rating and senior debt at BB.

The agency said the outlook revision is driven by the ongoing price war in Shaanxi province exacerbated by falling demand and rising raw material prices, which has weakened West China Cement's margins. In addition, the company undertook an aggressive 7.2 million ton capacity expansion in Xinjiang and Shaanxi this year, which will result in a net debt-to-EBITDAR ratio of more than 2 timse at the end of 2011, Fitch said.

However, the agency expects improvement in market conditions by mid-2012. Fitch said the scale and sustainability of this improvement and West China Cement's discipline in scaling back capex will be the key factors for determining whether further negative actions are warranted.

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