Fitch still downbeat on loss-making IRPC

Fitch Ratings (Thailand) has kept its negative outlook for SET-listed IRPC Plc, citing weak credit stemming from low cash flow and high capital expenditure.

The petrochemical company’s national long-term rating is A-(tha), its national short-term rating F2(tha) and its senior unsecured class national rating A-(tha).

IRPC’s financial leverage is not expected to improve to levels appropriate for its stand-alone rating of BBB+(tha) before next year.

The long-term ratings incorporate a onenotch uplift to take into account linkages with the company’s single biggest shareholder, PTT Plc.

IRPC has received tangible financial support in the form of extended credit terms from PTT, which has helped IRPC’s liquidity and overall credit profile.

Fitch expects the company to have generated negative earnings before interest, tax, depreciation and amortisation last year due to inventory losses resulting from the sharp drop in oil prices.

Higher margins and better asset use are critical for the company to achieve an improved financial profile over the next two years.

Without the inventory losses, IRPC’s overall operating performance and margins were fairly robust. Fitch expects operating cash flow

improve from 2015-18 due to

to enhancements to assets from an ongoing investment programme.

IRPC’s spending requirements are likely to remain elevated in 2015 before falling sharply from 2016 onwards with the completion of major projects such as the one to raise yields for light and middle distillate products and add capacity for olefin products.

Other projects aim to add capacity for higher-value propylene derivative products, reduce costs and improve margins.

IRPC continues to receive support from PTT in the form of flexible credit terms on crude purchases.

Fitch expects credit terms to gradually normalise as IRPC’s operating cash flow improves.

In the meantime, the linkage with PTT is underscored by PTT’s status as the single largest shareholder of IRPC at 39% ownership.

IRPC falls within PTT’s central treasury management framework, and key personnel from the parent firm are occasionally rotated into IRPC.

The company has a competitive advantage as a fully integrated oil refiner and petrochemical producer, building on its expertise and long track record in downstream petrochemicals in Thailand.

IRPC shares closed yesterday on the SET at 4.04 baht, up 10 satang, in trade worth 574 million baht.