Fitch downgrades InterCement

Fitch Ratings said it downgraded the long-term foreign- and local-currency issuer default ratings of InterCement Participacoes SA to BB- from BB and long-term national rating to A+(bra) from AA-(bra).

The agency also downgraded InterCement Brasil SA’s long-term local-currency issuer default rating to BB- from BB, long-term foreign-currency issuer default rating to BB- from BB and long-term national rating to A+(bra) from AA-(bra).

Cimpor Financial Operations BV’s senior unsecured notes due 2024, which are unconditionally guaranteed by InterCement Brasil, also were downgraded to BB- from BB.

The outlook also was revised to stable from negative.

The downgrades reflect the deterioration of InterCement's credit metrics with limited recovery over the medium term given the harsh scenario for cement sales in Brazil, Fitch explained.

The agency said it expects InterCement's net leverage to remain high at about 5x during 2016 with a modest decline to 4.7x in 2017.

The stable outlook reflects InterCement's adequate liquidity position with manageable debt maturity profile up to 2018, supporting operating cash flow volatilities in the period, Fitch said.

But cement producers in Brazil will face further headwinds in the second half of 2016 and into mid-2017 as industry fundamentals remain weak amid the country's economic recession, the agency said.

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