Fitch Ratings expects Taiwan Cement to maintain credit profile after earthquake

The BBB-/Stable credit profile of Taiwan Cement Corp (TCC) is unlikely to be affected by the equipment damage and operational disruption caused by the 3 April 2024 earthquake in eastern Taiwan, according to Fitch Ratings.

Repairment costs and lost revenue in relation to the earthquake should not damage TCC's financial profile, as the amounts are immaterial relative to TCC's EBITDA of TWD20bn (US$619.7m) and TWD126bn of cash on hand as of end-2023. The company's preliminary assessment estimates the impact on operations will see revenue fall by TWD750m and gross profit by TWD250m. It also expects to spend TWD800m to repair damaged equipment, with TWD220m to be covered by insurance claims, reports Dow Jones Institutional News.

TCC expects to resume its suspended operations due to equipment damage within a month with Ho-Ping Power Co's damaged electricity generator back in action on 14 April and the damaged kiln of the cement plant resuming operation on 26 April. Pier operations at Ho-Ping Port are scheduled to return to normal by early May as the port has activated back-up facilities to transport cement and coal.

Fitch estimates the company's EBITDA net leverage fell to below 2.0x in 2023 (2022: 3.7x), boosting leverage headroom. The ratings agency expects the recently completed acquisition of additional stakes in the Turkey and Portugal cement businesses to lift revenue and EBITDA, and help TCC maintain a moderate leverage profile.

The company's ratings reflect the strong market position of its geographically diversified cement business and stable cash flow from its coal-fired power plant. However, the ratings are constrained by the weak cement market in China, the uncertain EBITDA contribution from the green-transition businesses and large green-transition investments, says Dow Jones.