S&P downgrades Degussa's ratings outlook to negative

24 June 2005 17:20  [Source: ICIS news]

LONDON (CNI)--Standard & Poor's Ratings Services said Friday it has revised its outlook on Germany-based specialty chemicals manufacturer Degussa's BBB+ long-term and A-2 short-term ratings to negative from stable as a result of the difficult industry environment.

The ratings agency's credit analyst Tobias Mock said: "The outlook revision reflects our expectation that the business environment for specialty chemicals companies will remain challenging, thereby making it difficult for Degussa to improve its profitability and cash flow generation to an extent in line with the BBB+ rating."

"Structural changes in several markets, continuing high prices for key raw materials, as well as unfavorable currency exchange rates are all weighing on Degussa's profitability," he added. 

Standard & Poor's said Degussa needs to be able to increase its selling prices to alleviate margin pressure from rising raw material prices.

Mock said it will "be challenging for Degussa to improve its debt coverage ratios of FFO to fully adjusted net debt of about 30% through the cycle and free operating cash flow to fully adjusted net debt to about 15%-20%, to be in line with the rating category".

By: Hilde Ovrebekk
+44 20 8652 3214

For the latest chemical news, data and analysis that directly impacts your business sign up for a free trial to ICIS news - the breaking online news service for the global chemical industry.

Get the facts and analysis behind the headlines from our market leading weekly magazine: sign up to a free trial to ICIS Chemical Business.

Printer Friendly