Fitch downgrades InterCement due to weak Argentine outlook

Fitch Ratings had downgraded InterCement Participacoes SA's Long-Term Foreign and Local Currency Issuer Default Ratings to 'B-' from 'B'. The rating outlook is stable.

The downgrade is due to negative GDP growth expectations in Argentina during 2020 and a continued decline in the purchasing power of the company's clients in this market due to high inflation and the deterioration of the Argentine peso. These factors will weaken demand for cement in this market and are factored into the downgrade of the ratings. The Argentine market has accounted for around 60 per cent of the company's consolidated EBITDA in recent years due to the collapse in demand for cement in Brazil.

Fitch estimates that the company will need to generate at least EUR100m of EBITDA in Brazil to stabilise its capital structure, which will likely need several years of robust economic growth. This estimate assumes the stabilisation of Argentine construction activity in 2021, which is highly uncertain.

Intercement operates in Argentina through its Loma Negra CIASA subsidiary, which controls seven plants with a total capacity of 8.44Mta.