Tunisian phosphate firms GCT and CPG have outlook cut by Fitch

07 November 2012 13:46  [Source: ICIS news]

LONDON (ICIS)--Tunisian phosphate producer Groupe Chimique Tunisien (GCT) and sister firm Compagnie des Phosphates de Gafsa (CPG) had their national long-term ratings outlook cut by Fitch Ratings on Tuesday.

The companies' outlook was revised to Negative from Stable to reflect "the weakening trend in the Tunisian sovereign rating and the state-implied willingness to provide timely support to CPG and GCT," the agency said.

According to the agency, both CPG and GCT managed to "sustain adequate credit profiles in 2011, despite substantial production decline and lower profitability".

"However, going into 2012 the cash position is expected to deteriorate given weak top line revenue recovery as production is still below historical levels and the execution of capital expenditure plans," it added.

While Fitch expects GCT's phosphate production to jump 30% year on year to 3m tonnes in 2012, that level is still below historical levels and both companies' ratings "remain constrained by the lack of diversification and the cyclicality of the global agriculture market".

"The sustainability of phosphate production at below 5m tonnes/year is likely to cut into phosphate stocks and result in supply disturbances by 2014/15," Fitch warned.

Analysts from the agency expect GCT to lose its net cash position in 2012 as operating margins continue to tighten. While revenue is expected to increase 17% year-on-year, "operating profitability will come under pressure due to high raw material prices".

GCT and CPG could not immediately be reached for comment on Wednesday.

By: Richard Ewing
+44 208 652 3214

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