Fitch cuts Pfleiderer

Fitch Ratings downgraded Pfleiderer AG Group including cutting its senior unsecured debt to BB from BB+. The outlook remains negative.

Fitch said the downgrade reflects Pfleiderer's low fiscal 2003 cash generation and the group's continuing weak credit profile.

Pfleiderer has been hit by raw material pricing pressures in its largest division, engineered wood, while it is undergoing a prolonged restructuring and repositioning of its operations and product ranges.

The negative outlook reflects the execution risks involved in this process as well as the continuing mature market conditions in engineered wood, Fitch added. A decline in the German furniture sector has increased downward pricing pressures on engineered wood, which are exacerbated by the insolvency of a major domestic player now under liquidation.

Although a cost-saving initiative launched in March 2003 will help cushion the deterioration in the group's performance, Fitch noted that any material earnings improvement can only be realized after the refocus is finalized and the domestic pricing pressure in engineered wood eases. While the company's infrastructure technology business enjoys stable cash flows, its telecommunication masts face delayed capex from mobile phone operators installing the German UMTS infrastructure.

Fitch expects Pfleiderer's financial profile to remain constrained by the need to fund internal and external growth required to re-position its core businesses, and to migrate the product range into higher value-added materials.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.