S&P downgrades KCC

S&P said it downgraded its rating for KCC Corp. to BB+ from BBB-. “We lowered the rating on KCC to reflect our view of the company’s weakened financials amid the tough operating environment,” the agency said in a press release.

S&P said it believes KCC’s operating conditions could remain subdued due to the weak domestic housing market and the sluggish macro environment.

“We estimate KCC’s reported EBITDA will fall by another 20% in 2019, following an 11% decline in 2018. That’s because the company’s cash cow – the building materials business – remains weak. KCC reported a 12% fall in sales and a 34% drop in operating profit in 2019. We believe the sharp decline in earnings is mainly due to the building materials division, which drove down KCC’s reported EBITDA margin to 12.6% in the third quarter of 2019, from 14.2% year on year,” S&P said.

Given declining new housing move-ins and stagnant remodeling housing volumes, S&P forecasts KCC’s core operations to remain subdued over the next 12–24 months. The agency expects the company’s core operations EBITDA to further decline by 6% in 2020.

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