Sumitomo Chemical's Baa1 rating under review – Moody’s

19 March 2013 08:05  [Source: ICIS news]

SINGAPORE (ICIS)--Ratings firm Moody’s said on Tuesday it has placed Japanese producer Sumitomo Chemical’s “Baa1” long-term issuer rating on review amid concerns that the company could take longer than expected to lower its high leverage position because of weak earnings and cash flow position.

“The Baa1 rating was based on Moody's expectation of a steady reduction in the firm's leverage metrics over the intermediate term,” it said in a statement.

Sumitomo Chemical's leverage has increased in the last few years on the back of its high level of capital expenditure and aggressive acquisitions , it said.

“However, given the current challenging operating environment, the company's profitability is likely to remain under pressure, thereby hampering its ability to reduce debt,” Moody’s said.

Sumitomo Chemical expects to report a net loss of yen (Y) 50bn ($524m) billion for the fiscal year ending March 2013 because of various restructuring measures, including the closure of the Chiba ethylene plant, it added.

Moody's review will focus on Sumitomo Chemical’s ability to implement a mid-term strategy announced in February this year which includes the reduction of its total debt to below Y900bn as well as improving overall profitability by restructuring its unprofitable units and developing next-generation businesses.

The ratings firm will also focus on earnings from Sumitomo Chemical’s IT-related chemicals, health and crop sciences and pharmaceuticals segments, as these are key growth drivers, it added.

($1 = Y95.4)

By: Nurluqman Suratman

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