Fitch cuts InterCement

Fitch Ratings said it downgraded InterCement Participacoes SA’s long-term foreign and local currency issuer default ratings to B- from B as well as the company’s long-term national scale rating to BB+(bra) from BBB-(bra). In addition, Fitch downgraded InterCement Financial Operations BV’s unsecured notes due 2024 to B-/RR4 from B/RR4. The outlook is stable.

The downgrade is due to negative GDP growth expectations in Argentina during 2020 and a continued decline in the purchasing power of the company’s clients in this market due to high inflation and the weakening of the Argentine peso. These factors will weaken demand for cement in this market and are factored into the downgrade of the ratings. The Argentine market has accounted for around 60% of the company’s consolidated EBITDA in recent years due to the collapse in demand for cement in Brazil, Fitch said.

Fitch estimates InterCement will need to generate at least €100 million of EBITDA in Brazil to stabilize its capital structure, which will likely need several years of robust economic growth. This estimate assumes the stabilization of Argentine construction activity in 2021, which is highly uncertain.

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