Reuters
S&P affirms Alumina Ltd. Ratings off watch; outlook is negative
Edited by : AL CIRCLE
2 min read
Current trading conditions in the aluminum industry are challenging, driven by soft aluminum prices, the strong Australian dollar, and increasing input costs.
We affirmed the 'BBB' rating on Alumina and removed it from CreditWatch negative, as we expect that Alcoa World Alumina and Chemicals (AWAC) would adjust its operations to respond to market conditions or Alumina would exercise its financial levers to protect its credit metrics.
The outlook is negative because we expect Alumina's earnings to be weaker in 2012 if these trading conditions were to persist, which could worsen its credit metrics.
Rating Action
On April 30, 2012, Standard & Poor's Ratings Services affirmed its 'BBB' long-term corporate credit and debt ratings on Australian mining company Alumina Ltd. We also removed the ratings from CreditWatch with negative implications, where they were placed on March 28, 2012. The outlook is negative.
Rationale
The negative outlook reflects our concerns that current challenging trading conditions could weaken Alumina's earnings. If currently soft aluminum and alumina prices, higher input costs, and the strength of the Australian dollar were to persist, it will worsen Alumina's key cash flow metrics in 2012.
Although aluminum demand continues to grow in 2012, we expect it to grow at a slower pace than that of 2011. Combined with the current oversupply, this would dampen aluminum prices. In the first three months of calendar 2012, aluminum prices have averaged at about US$0.99 per pound, compared to an average of US$1.09 per pound in 2011. In addition, the Australian dollar remains at above parity against the U.S. dollar. We also expect oil and caustic prices to remain at relatively high levels in 2012.
We affirmed the 'BBB' rating on Alumina and removed it from CreditWatch negative, as we expect that Alcoa World Alumina and Chemicals (AWAC) would adjust its operations to respond to market conditions or Alumina would exercise its financial levers to protect its credit metrics.
The outlook is negative because we expect Alumina's earnings to be weaker in 2012 if these trading conditions were to persist, which could worsen its credit metrics.
Rating Action
On April 30, 2012, Standard & Poor's Ratings Services affirmed its 'BBB' long-term corporate credit and debt ratings on Australian mining company Alumina Ltd. We also removed the ratings from CreditWatch with negative implications, where they were placed on March 28, 2012. The outlook is negative.
Rationale
The negative outlook reflects our concerns that current challenging trading conditions could weaken Alumina's earnings. If currently soft aluminum and alumina prices, higher input costs, and the strength of the Australian dollar were to persist, it will worsen Alumina's key cash flow metrics in 2012.
Although aluminum demand continues to grow in 2012, we expect it to grow at a slower pace than that of 2011. Combined with the current oversupply, this would dampen aluminum prices. In the first three months of calendar 2012, aluminum prices have averaged at about US$0.99 per pound, compared to an average of US$1.09 per pound in 2011. In addition, the Australian dollar remains at above parity against the U.S. dollar. We also expect oil and caustic prices to remain at relatively high levels in 2012.
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