Standard & Poor's (S&P) Ratings Services revised its outlook on Titan Cement Co to stable from negative. At the same time, we affirmed our 'BB-' long-term and 'B' short-term corporate credit ratings on the group.
S&P said the outlook revision reflects its view that "Titan will be able to sustain solid cash flows and an 'adequate' liquidity profile over the next 24 months. ??Titan was able to maintain solid cash flows despite disruption in its key markets in the year ended 31 December 2011. This disruption was most notable in Greece, where Titan's combined domestic and export sales declined by 41% in 2011; as well as in Egypt due to recent political disruption and market volatility.
"These difficult market conditions, combined with the group's loss-making US operations, contributed to a 19% reduction in overall group turnover to EUR1091m and a 34% decline in Standard & Poor's-adjusted EBITDA to EUR205m in 2011. ??Despite this, Titan reported EUR82m of adjusted discretionary cash flow in 2011, with which it continued to reduce net debt. As a result, the group maintained credit metrics with a degree of headroom for the ratings." Titan's adjusted funds from operations (FFO) to debt was 19.2% on Dec. 31, 2011, in line with S&P's base-case forecast.
The ratings agency believes that 2012 will be another challenging year for Titan, and the group could see its adjusted EBITDA margin decline further toward the mid-teens from 18.8% at year-end 2011. Nevertheless, S&P forecast that Titan should be able to maintain robustly positive discretionary cash flow, resulting in broadly stable credit metrics.