Fitch affirms Societe des Ciments d'Enfidha's long-term rating, Tunisia

Fitch affirms Societe des Ciments d'Enfidha's long-term rating, Tunisia
Published: 17 October 2012


Fitch Ratings has affirmed Tunisia-based cement manufacturer Societe des Ciments d'Enfidha's (SCE) National Long-term rating at 'BBB(tun)' and National Short-term rating at 'F3 (tun)'. The Outlook is Stable. 

The affirmation reflects SCE's recovery of an adequate trading performance in the first eight months of 2012 after production recovered to pre-revolution levels at its Enfidha plant.

Despite expected lower operating margins in 2012 compared to historical levels due to rising energy prices and wages as well as frozen regulated cement prices, the agency believes SCE free cash flows (FCF) will return to positive territory in 2012 albeit lower than historical levels (FCF margin expected at 3% from 18% in 2010) and FFO adjusted leverage to recover to 0.8x at FYE12 from 1.4x at FYE11. 

The ratings continue to reflect SCE's position as Tunisia's largest cement producer but are constrained by the small size of the business and limited geographical diversification compared to Fitch-rated peers. The ratings also account for the sector operating risk resulting from exposure to cyclicality, being dependent on the overall economic environment, public expenditure and construction.

The agency also remains concerned about the expected overcapacity in the sector 2013/2014 as new capacity additions come into place in a context of low economic growth and limited public spending as well as uncertainties about future regulated price developments and export regulations. 

SCE has an estimated production capacity of 2Mta. It is owned by Spanish cement producer, Cementos Portland Valderrivas.