JAKARTA (TheInsiderStories) – Fitch Ratings Indonesia has downgraded precast concrete producer, PT Waskita Beton Precast Tbk‘ (IDX: WSBP) National Long-Term Rating to ‘CCC-(idn) from earlier BB (idn) with outlook negative. The rating agency also placed the company on Rating Watch Negative (RWN).
At the same time, Fitch has downgraded the manufacturer’ Rp2 trillion (US$136.98 million) unsecured bond program to CCC- (idn), from BB (idn). The downgrade follows similar rating action on parent, PT Waskita Karya Tbk (IDX: WSKT) (B(idn)/RWN), after lowered the holding’ Standalone Credit Profile to CCC-(idn) from BB (idn) on weakening liquidity and higher refinancing risk.
“The RWN similarly reflects its parent’ RWN,” said Fitch in an official statement released on Tuesday (08/25), by adding the CCC National Ratings denote a very high level of default risk relative to other issuers or obligations in the same country.
In addition, “We assess legal and operating ties to be moderate due to senior management overlap and influence over Waskita Beton‘ investments, strategy and operations.”
Fitch also stated, the company’ liquidity has been deteriorating on the back of slower project completion and challenging cash collection from project owners. These will ultimately result in depressed cash flow from operations for the issuer as payment terms from customers are prolonged despite project completion.
Challenging cash collections from project owners translated into significantly lower receipts from customers of Rp1.6 trillion in first half (1H) of 2020 – representing a nearly 60 percent decline from Rp3.8 trillion in 1H of 2019. CFO was a negative Rp240 billion in 1H 0f 2020 after adjusting for the impact of a one-off receipt from value-added tax restitution of Rp416 billion.
Until June, Waskita‘ revenue has declined significantly, by 72 percent to Rp1.1 trillion in 1H of 2020 from 1H of 2019 Rp3.8 trillion, as project completion and delivery were affected by the large-scale social distancing measures in 2Q of 2020.
“At the same time, we estimate that debt will continue to rise in the next 18 months as WSBP will need to cover the decline in CFO from borrowings – exacerbating the CFO pressure with a rising interest burden,” said the agency.
Fitch expects Waskita Beton‘ order-book to remain under pressure until end- 2021 as new contracts will not recover substantially in 2020 and 2021. New contract achievement is unlikely to return to the 2018-2019 level of above Rp6.5 trillion by end-2020, although tenders for new projects will resume in 2H20 as social distancing measures ease and business operations normalize.
The producer had only secured an additional Rp931 billion of new contracts up to 1H of 2020, down by more than 70 percent from Rp3.2 trillion in 1H of 2019. As a result, its order-book fell to Rp5.6 trillion from Rp12.6 trillion in 1H of 2019.
Previously, the Indonesia Stock Exchange decided to lift the suspension of Waskita Beton shares on August 3. The suspension was carried out regarding the postponement of third interest payment for continuous bond of the issuer.
Edited by Editorial Staff, Email: email@example.com