Moody's views Huaxin Cement negatively

Moody's Investors Service said it revised the outlook on Huaxin Cement Co., Ltd.'s rating to negative from stable.

At the same time, the agency said it affirmed Huaxin Cement's Baa1 issuer rating and the company's Baa1 senior unsecured rating on the bond issued by Huaxin Cement International Finance Co. Ltd., an indirectly wholly owned subsidiary of Huaxin Cement, based on the guarantee provided by Huaxin Cement. Moody's has also revised the outlook on Huaxin Cement International Finance rating to negative from stable.

"The negative outlook reflects China's prolonged property sector weakness, which will structurally reduce cement sector demand and pressure profit margins. These risks have reduced Huaxin Cement's financial buffer and added uncertainties to its recovery path," said Roy Zhang, a Moody's vice president and senior analyst, in a press release.

Moody's said it forecasts Huaxin Cement’s gross leverage to rise to 2.2x by the end of 2023, from 1x as of the end of 2021, citing China's prolonged property downturn and economic slowdown. It has also been producing negative free cash flow since 2021.

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