Wienerberger
Moody's changed its outlook on Wienerberger's Ba2 rating from stable to negative. The action was triggered by the weak operating performance of Wienerberger's bricks & tiles activities across most of its European markets during 2012, contributing – in addition to the debt increase from the Pipelife acquisition – to weak credit metrics for the current rating. Moody's believes that the company should be able to improve its credit metrics gradually over the next 12 to 18 months, supported by positive impacts from cost saving measures. The agency, however, highlights that a full restoration of credit metrics remains dependent on a gradual recovery in market conditions across Europe in 2H13 and 2014. Overall, the rating action does not come as a surprise in view of the challenges Wienerberger is facing in its main markets, with a recovery more likely being a medium-term event. We have a sell recommendation on the senior notes, but continue to like the hybrid.
Nello specifico:
Rating Action: Moody's changes its outlook on Wienerberger's Ba2 CFR to Negative
Global Credit Research - 08 Apr 2013
Frankfurt am Main, April 08, 2013 -- Moody's has today changed its outlook on Wienerberger AG's Ba2 Corporate Family rating to negative from stable. Wienerberger AG's Corporate Family, Senior Unsecured and Probability of Default ratings have been affirmed at Ba2, Ba2 and Ba2-PD respectively. The rating on the group's EUR500 million Perpetual Subordinated bond has also been affirmed at B1.
RATINGS RATIONALE
The revision of the outlook to negative was prompted by the weak operating performance of Wienerberger's bricks & tiles activities across most of its European markets during 2012. The group's bricks & tiles business posted a 19% decline in EBITDA in Western Europe and a 30% decline in Eastern Europe. The management launched a EUR30 million cash restructuring plan in H2 2012, which hurt the group's earnings and operating cash flow generation especially in Q4 2012. The decline in the bricks & tiles business could not be fully compensated by the continued improvement in the group's US performance and the positive contribution from 7 months of Pipelife consolidation. Mid 2012 Wienerberger acquired the 50% shareholding in Pipelife which it did not own and started to fully concolidate it in June 2012.
Wienerberger's reported gross cash flow declined by close to EUR60 million to EUR127 million. Coupled with the closing of the Pipelife acquisition (approximately EUR230 million increase in net debt) the credit metrics of Wienerberger deteriorated markedly in 2012 with RCF/ net debt dropping to around 10% from close to 16% in 2011. Pro-forma of the Pipelife acquisition RCF/Net debt is estimated to be around 11%-11.5% still well below our expectation of at least 15% for the current rating category.
Moody's believes that Wienerberger should be able to improve its credit metrics gradually over the next 12 to 18 months mainly supported by consolidating effects from Pipelife (EUR30 million impact on EBITDA) and from the positive impact from the group's cost cutting measures. The ability of Wienerberger to improve its metrics to a level commensurate with a Ba2 rating remains however conditional to a gradual recovery in market conditions across Europe in H2 2013 and 2014. A sustained recovery in macroeconomic conditions in Europe in H2 2013 remains highly uncertain at this stage especially in light of the recent further deterioration in leading indicators for both the manufacturing and construction sectors throughout Q1 2013. Despite the weakened profitability Wienerberger was able to generate sizeable free cash flow in 2012 (EUR 83 million according to Moody's definition), predominantly driven by a strong release in net working capital, and continued low capital expenditure. For 2013 we do not expect Wienerberger to be able to repeat a similar working capital release which will most likely lead to lower, but still positive free cash flow generation.
The liquidity profile of Wienerberger is adequate. The group reported EUR242 million of cash and marketable securities on balance sheet at fiscal year-end 2012 as well as EUR430 million committed unused credit lines. Wienerberger will not refinance around EUR80mio of credit facilities coming due in 2013 to reduce the negative carry on these facilities. Overall the group's liquidity sources are more than sufficient to cover all liquidity requirements for the next four quarters mainly consisting of working cash, modest Working Capital requirements and debt repayments as well as capex and dividends. We note that Wienerberger has EUR250 million of maturities in 2014, which will need to be addressed during the course of 2013.
A sharp deterioration in market conditions leading to materially negative free cash flow generation and RCF/Net debt (pro-forma of the acquisition of Pipelife) dropping sustainably below 15% would exert negative pressure on Wienerberger's rating. EBIT / Interest dropping below 1.0x would also exert negative pressure on the ratings.
A stronger market recovery than currently anticipated coupled with a conservative financial policy leading to sustained positive free cash flow generation as well an improvement in RCF/Net debt towards 20% and EBIT / Interest towards 2.0x could lead to a rating upgrade over time.
The principal methodology used in this rating was the Global Building Materials Industry published in July 2009. Please see the Credit Policy page on
Moody's - credit ratings, research, tools and analysis for the global capital markets for a copy of this methodology.
Headquartered in Vienna, Austria, Wienerberger AG is the world's largest brick manufacturer and Europe's largest producer of clay roof tiles as well as a leading supplier of pipe solutions following the 100% integration of the Pipelife group (both plastic and ceramic pipes). The group produces bricks, clay roof tiles, pavers and clay and plastic pipes in 221 plants and operates in 30 countries worldwide and five export markets. Wienerberger has acquired Pipelife, a producer of pipes in 2012. Pipelife used to be a 50%/50% joint venture with Solvay. The company's main markets are North America (8% of 2012 sales), Western Europe (65%), and Eastern Europe (27%). Wienerberger generated revenues of close to EUR 2.4 billion in fiscal year 2012.
un grazie a bosmeld per averla segnalata quand'era a 87 l'ottobre scorso