East Europe petchems to keep capex in check amid recovery - Fitch

13 October 2010 17:00  [Source: ICIS news]

BUDAPEST (ICIS)--Central and eastern Europe’s big refining and petrochemical groups are on the road to recovery but remain under pressure to keep capital expenditure (capex) under strict control until at least 2012, an official with Fitch Ratings said on Wednesday.

“It will be a long road to recovery [for these groups], though the integrated companies are better positioned than the pure refiners,” said Arkadiusz Wicik, the Europe, Middle East and Africa energy, utilities and regulation director of Fitch Ratings.

He was speaking at the World Refining Association’s (WRA) 13th Annual Central & Eastern European Refining and Petrochemicals Roundtable in Budapest, Hungary.

“There is a stable outlook for the leading players in the region,” he said in his presentation to delegates.

The companies’ focus on maintaining free cash flow and a prudent approach to mergers and acquisitions (M&A) were expected to continue, Wicik added, although they had the advantage that economic recovery was likely to be faster in central and eastern Europe than in western Europe.

Wicik also noted that the region’s economies were not uniform. Poland avoided recession, while GDP in Lithuania dropped by 15% in 2009, he said.

A disadvantage that the region’s groups was that “emerging-market status and Europe’s sovereign debt crisis may hinder access to international debt markets,” he said.

Many of the regional players also had high financial leverage due to M&A and/or large capex, Wicik said.

Fitch’s financial leverage ratios for were 1.5 for Austria’s OMV; 2.9 for Hungary’s MOL; 3.3 for Poland’s PKN Orlen; and 11.0 for Romania’s Rompetrol.

Of those companies, Rompetrol was the only one not currently enjoying a stable outlook endorsement from Fitch.

Rompetrol, involved in an ongoing dispute with the Romanian government over unpaid debts, has had its ratings watch moved to “negative”.

OMV had “limited rating headroom for large, debt-funded acquisitions”, said Wicik.

Orlen’s outlook was changed to “stable” from “negative” on 10 September only after addressing debt worries. Further debt reduction was a strategic target for Orlen, Wicik said.

For more on PKN Orlen visit ICIS company intelligence
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By: Will Conroy
+44 20 8652 3214

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