Presentation is loading. Please wait.

Presentation is loading. Please wait.

Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poor’s. Copyright © 2012 Standard.

Similar presentations


Presentation on theme: "Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poor’s. Copyright © 2012 Standard."— Presentation transcript:

1 Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poor’s. Copyright © 2012 Standard & Poor’s Financial Services LLC, a subsidiary of The McGraw-Hill Companies, Inc. All rights reserved. How Are Brazilian Metals & Mining and Forest Products Companies Weathering the Challenging Global Environment? Reginaldo Takara Managing Director, Corporate Ratings February 2012

2 2. Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poor’s. Rating Outlook Distribution for Rated Entities Most companies have stable outlooks: –Vale: A-/Stable/-- (u/g 23.nov.11) –CSN: BBB-/Stable/-- (aff 22.nov.11) –Gerdau: BBB-/Stable/-- (stb outlk 24.nov.11) –Usiminas: BBB-/Negative/-- (aff neg 18.mar.12) –Klabin: BB+/Stable/-- (aff 27.dec.11) –Suzano: BB+/Negative/-- (outlk neg from stb 23.nov.11) –Fibria: BB/Stable/-- (outlk stb from pos 23.nov.11) –Magnesita: BB-/Positive/-- (outlk pos from stb 31.may.11)

3 3. Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poor’s. Rated Brazilian Metals & Mining Companies Steel Companies –Excess capacity globally should keep downward price pressure –Import competition, either active or latent, will remain a risk –Input cost pressure (iron ore, coal) –Strong currency as a negative –Strong liquidity Mining Companies –Tight supply of iron ore should keep prices firm in the intermediate term –Demand should remain growing, even with China growing at a slower pace –Strong cost position due to favorable mining reserves and low costs –High capital expenditures to expand capacity –Strong liquidity

4 4. Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poor’s. Rated Brazilian Forest Products Companies Market Pulp –Excess capacity globally should keep downward price pressure –New capacities coming onstream in the intermediate term increase uncertainty –Strong currency as a negative cost factor – Decisions about capital expenditures may change leverage trends Paper –Import competition, especially from China, should grow in the intermediate term –Cost position is favorable because of competitive pulp –Some niche, profitable markets should remain strong, as packaging –High gross debt leverage is a concern

5 5. Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poor’s. Our expectations for Metals & Mining… We expect performance for steel makers to improve slightly, more so in second half 2012, but we are more cautious about the uncertain global environment Steel makers will also have to work hard to keep improving cost structures –No significant room for price increases –Demand in Brazil should remain firm, thanks to increasing investments in capacity expansion Mining companies should keep reporting sound cash flows. Downside risks in China, mainly M&A may pick-up as opportunities grow, but companies have been generally more conservative/prudent about their non- organic expansions

6 6. Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poor’s. Our expectations for Forest Products… We expect performance to remain volatile in the intermediate term as prices have softened recently Many players are seeking ways to improve their capital structures –Asset sales –Equity infusions Expansion plans have been generally put on hold M&A activity is not clear right now due to high leverage reported by most players, but may pick-up as opportunities grow

7 7. Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poor’s. FX Appreciation on Flat Steel Makers

8 8. Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poor’s. Steel Exports Pre And Post Crisis

9 9. Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poor’s. Profitability Softening EBITDA Margin Evolution Since 4Q2009

10 10. Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poor’s. Some Companies Still Have High Capex Ahead Capex/Sales Since 4Q2009

11 11. Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poor’s. Cash Flow Protection Metrics Weakening FFO/TD Since 4Q2009

12 12. Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poor’s. Liquidity Remains Strong (FFO+Cash)/TD Since 4Q2009

13 13. Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poor’s. Key Themes for Brazil’s M&M and Forest Products FX Appreciation –Affecting cost position of all companies, more so for steel makers and market pulp producers –Increases import competition in steel Capital Expenditures Trends Are Mixed –New investments in iron ore expansion –Some pulp investments delayed –Adequate funding under our base case assumptions Maturities expected to be manageable –Pulp companies seeking to reduce leverage –Covenant breaches waived

14 14. Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poor’s. Main Risks Slower growth in China Input cost pressures coupled by FX appreciation Competitive pressures: Steel from low-cost countries, new capacities in pulp coming onstream More aggressive M&A Global economic slowdown (chance stands at 25% in U.S. and 40% in Europe)

15 15. Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poor’s. Analytical Contacts U.S. –Marie Shmaruk, (212) Canada –Donald Marleau, (416) Europe –Andrey Nikolaev, Latin America –Reginaldo Takara, Asia –May Zhong,

16 16. Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poor’s. Copyright © 2012 by Standard & Poor’s Financial Services LLC (S&P), a subsidiary of The McGraw-Hill Companies, Inc. All rights reserved. No content (including ratings, credit-related analyses and data, model, software or other application or output therefrom) or any part thereof (Content) may be modified, reverse engineered, reproduced or distributed in any form by any means, or stored in a database or retrieval system, without the prior written permission of S&P. The Content shall not be used for any unlawful or unauthorized purposes. S&P, its affiliates, and any third-party providers, as well as their directors, officers, shareholders, employees or agents (collectively S&P Parties) do not guarantee the accuracy, completeness, timeliness or availability of the Content. S&P Parties are not responsible for any errors or omissions, regardless of the cause, for the results obtained from the use of the Content, or for the security or maintenance of any data input by the user. The Content is provided on an “as is” basis. S&P PARTIES DISCLAIM ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE, FREEDOM FROM BUGS, SOFTWARE ERRORS OR DEFECTS, THAT THE CONTENT’S FUNCTIONING WILL BE UNINTERRUPTED OR THAT THE CONTENT WILL OPERATE WITH ANY SOFTWARE OR HARDWARE CONFIGURATION. In no event shall S&P Parties be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, or losses (including, without limitation, lost income or lost profits and opportunity costs) in connection with any use of the Content even if advised of the possibility of such damages. Credit-related analyses, including ratings, and statements in the Content are statements of opinion as of the date they are expressed and not statements of fact or recommendations to purchase, hold, or sell any securities or to make any investment decisions. S&P assumes no obligation to update the Content following publication in any form or format. The Content should not be relied on and is not a substitute for the skill, judgment and experience of the user, its management, employees, advisors and/or clients when making investment and other business decisions. S&P’s opinions and analyses do not address the suitability of any security. S&P does not act as a fiduciary or an investment advisor. While S&P has obtained information from sources it believes to be reliable, S&P does not perform an audit and undertakes no duty of due diligence or independent verification of any information it receives. S&P keeps certain activities of its business units separate from each other in order to preserve the independence and objectivity of their respective activities. As a result, certain business units of S&P may have information that is not available to other S&P business units. S&P has established policies and procedures to maintain the confidentiality of certain non–public information received in connection with each analytical process. S&P may receive compensation for its ratings and certain credit-related analyses, normally from issuers or underwriters of securities or from obligors. S&P reserves the right to disseminate its opinions and analyses. S&P's public ratings and analyses are made available on its Web sites, (free of charge), and and (subscription), and may be distributed through other means, including via S&P publications and third-party redistributors. Additional information about our ratings fees is available at STANDARD & POOR’S, S&P, GLOBAL CREDIT PORTAL and RATINGSDIRECT are registered trademarks of Standard & Poor’s Financial Services LLC.


Download ppt "Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poor’s. Copyright © 2012 Standard."

Similar presentations


Ads by Google