27 December 2012 16:09 [Source: ICIS news]
LONDON (ICIS)--Fitch Ratings on Thursday flagged up delays in essential capital expenditure (capex) at sole major Turkish petrochemicals producer Petkim while revising its outlook on the group's long-term foreign and local currency Issuer Default Rating (IDRs) to 'negative' from 'stable'.
“Fitch understands that the group has postponed some of its projects (ethylene and PTA [purified terephthalic acid] capacity increases) to fully assess the implications of the new investment incentive package designed by the Turkish government in 2012,” Fitch said in a report affirming Petkim's IDRs at 'B+'.
“Petkim's reduced operating cash flow generation constrains its ability to implement de-bottlenecking and expansionary investments, which Fitch regards as crucial to defending its competitive position,” it added.
Petkim capex for 2012 was revised down to $50m from $171m budgeted at the start of the year, while capex for 2011 was reduced to $90m against an initial budget of $131m, Fitch said.
In the first three quarters of 2012, Petkim was hit by a financial underperformance that “highlights its vulnerability to cyclical downturns and its weak cost position,” Fitch said.
The group's overall results in 2012 are likely to compare poorly with Fitch's previous forecasts, despite the rating agency's pre-existing assumptions of margin erosion and downward pressure on credit metrics, it added.
The controlling shareholder in Petkim is the State Oil Company of the Azerbaijan Republic (SOCAR).
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