Fitch alters Wanhua outlook to negative

Fitch Ratings said it revised the outlook of Wanhua Chemical Group Co., Ltd. to negative from stable and affirmed Wanhua's BBB+ long-term foreign-currency issuer default and senior unsecured ratings.

“The outlook revision is mainly driven by Fitch's expectation that Wanhua's free cash flow generation will remain negative in 2023-2024 due to higher-than-expected capex, which will delay deleveraging. The negative outlook also reflects volatility in refinancing risks from Wanhua's short-term-oriented funding structure,” the agency said in a press release.

Fitch said it previously expected Wanhua’s capital expenditures per year to be CNY 24 billion. However, it now sees them coming in at CNY 40 billion for 2023 and CNY 30 billion for 2023.

“We also expect the company's cash flow from operations to be below CNY 30 billion in 2023 before recovering toward CNY 34 billion in 2024 after expanding its production capacity. We now expect Wanhua's net leverage to reach 2.3x in 2023 rather than the previously anticipated deleveraging trend,” Fitch said.

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