Fitch Ratings has assigned Sri Lanka-based cable manufacturer Sierra Cables (Sierra), a National Long-Term Rating of ‘BB+(lka)’. The Outlook is Stable.
Sierra’s rating reflects its established core business, which has an extensive product portfolio, modest but expanding market share and stable EBITDA margins. This is counterbalanced by exposure to cyclical end-markets, risks associated with international expansion and losses at subsidiaries.
The rating is also supported by Fitch’s expectation that the company will maintain net leverage, measured as net adjusted debt/operating EBITDAR, at less than 2.5x over the medium term, despite planned capacity expansions. Leverage was 2.4x in the financial year ended 31 March 2016 (FY16).
Sierra’s customers are mostly in cyclical industries, including construction and infrastructure development, which substantially slowed down in the past 12-18 months. However, the government’s decision to resume work on many of the suspended projects and to launch a few new large-scale developments in 2016 will boost demand for the cable industry. Growth in construction of housing due to rapid urbanisation in Sri Lanka and gradual expansion in the manufacturing sector should also drive demand for cables.
Sierra’s rating reflects its established core business, which has an extensive product portfolio, modest but expanding market share and stable EBITDA margins. This is counterbalanced by exposure to cyclical end-markets, risks associated with international expansion and losses at subsidiaries.
The rating is also supported by Fitch’s expectation that the company will maintain net leverage, measured as net adjusted debt/operating EBITDAR, at less than 2.5x over the medium term, despite planned capacity expansions. Leverage was 2.4x in the financial year ended 31 March 2016 (FY16).
Sierra’s customers are mostly in cyclical industries, including construction and infrastructure development, which substantially slowed down in the past 12-18 months. However, the government’s decision to resume work on many of the suspended projects and to launch a few new large-scale developments in 2016 will boost demand for the cable industry. Growth in construction of housing due to rapid urbanisation in Sri Lanka and gradual expansion in the manufacturing sector should also drive demand for cables.
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