30 January 2002 21:31 [Source: ICIS news]
HOUSTON (CNI)--Credit ratings agency Standard & Poor's (S&P) lowered the corporate credit rating of polyester producer Wellman to BB-plus from BBB-minus Wednesday following Wellman’s announcement it will report weaker-than-anticipated fourth quarter results.
The New York City-based agency noted that Wellman will be "challenged" to improve its financial profile over the near term because of unfavourable economic conditions, competitive pressures on margins in the polyethylene terephthalate (PET) resins business and lower production volumes in the fibres and resins businesses.
Said S&P: "These issues and the expectation that business conditions may prove more difficult than previously anticipated indicate that Wellman’s financial profile has been stretched by significant capital outlays during recent years that have elevated debt and resulted in heightened pressure to extend credit arrangements that terminate over the next couple years."
Wellman of Shrewsbury, New Jersey is a leading producer of polyester staple fibres. It also is the third-largest producer of PET resins.
The ratings of Wellman reflect a below-average business risk profile that recognises its leading position in the PET segment of the polyester market, tempered by industry cyclicality and an increasingly narrow product focus, S&P added.
While PET prospects could improve modestly over the intermediate term, S&P said, margins have been constrained by lower demand due to the general economic slowdown as well as delayed buying from customers.
Said S&P: "Current ratings anticipate that business conditions will stabilise during the year ahead and that Wellman will take steps necessary over the near term to improve financial flexibility.
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