Fitch Ratings raises outlook for Poland’s PKN Orlen to ‘positive’

30 August 2012 17:45  [Source: ICIS news]

LONDON (ICIS)--Fitch Ratings has revised its outlook on Polish oil and petrochemical group PKN Orlen's long-term foreign and local currency Issuer Default Ratings (IDRs) to "positive" from "stable" and affirmed its long-term IDRs at 'BB+', the ratings agency said on Thursday.

“The outlook revision reflects Fitch's view that Orlen's long-term IDRs may be upgraded to 'BBB-' in the next 12-24 months should the company consistently maintain credit ratios at a moderate level ... [with an] adjusted net leverage of about 2x (excluding inventory holding gains/losses),” Fitch said.

“This ratio stood at 2.2x at end-December 2011. The future leverage level will partly depend on the planned strategy update, and the macroeconomic conditions for refining and petrochemicals operations in the medium term,” it added.

“The rating affirmation reflects Orlen's improved financial profile thanks to several measures taken by management to reduce leverage, including the disposal of [Orlen's 24.39% stake in telecoms operator] Polkomtel [for after-tax proceeds of approximately $1bn], its modest capex [capital expenditure] in 2011-2012 following a capex-intensive period until 2010 and no dividends paid in 2011-2012,” Fitch said.

Fitch calculated that 29% of Orlen's earnings before, interest, tax, depreciation and amortisation (EBITDA) are derived from petrochemicals.

“Fitch views Orlen as a refining company with high business diversification in light of its substantial petrochemical operations and a strong position in fuel retail sales. Diversification may help mitigate cash flow cyclicality, as seen in 2011 results, where solid performance in the petrochemicals segment supported Orlen's cash flow at a time of weaker refining profits,” the ratings agency added.


By: Will Conroy
+44 20 8652 3214



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