Fitch Affirms Votorantim Cimentos' IDR at 'BBB-'; Outlook remains Negative

Fitch Ratings has affirmed the Long-Term Foreign and Local Currency Issuer Default Ratings (IDRs) of Votorantim Cimentos SA (VCSA) at 'BBB-' and its National Scale rating at 'AAA(bra)'. The Rating Outlook for the IDRs remains Negative while the Outlook for the national scale rating has been revised to Negative from Stable.

The Negative Outlook reflects the challenges VCSA and its parent Votorantim SA (VSA) face as they attempt to deleverage by 2018. “It is likely VSA and VCSA will need to sell non-core assets and take other extraordinary measures to lower debt to prevent negative rating actions,” Fitch notes.

Going forward, the rating’s agency expects cement volumes in Brazil to remain subdued at around 53Mt for 2017. “Recovery of cement volumes will likely occur by 2018, but growth in volumes will be sluggish as Fitch projects cement volumes to remain below the level sold in 2014 for at least the next three years,” it adds. Fitch also said it envisions capacity utilisation rate in the Brazilian cement industry to remain low around 50-60 per cent.

VCSA’s capex will be lower than 2016, Fitch states, as the company has completed its two new plants in Brazil and Bolivia. Nevertheless, FCF is projected to remain negative at around BRL230m for 2017.