S&P lowers four fertilizer producers

Standard & Poor's Ratings Services said today that it had taken negative rating actions on four global fertilizer producers.

Specifically, the agency: (a) Lowered the long-term corporate credit rating on EuroChem Group AG to BB- from BB with a stable outlook; (b) lowered the long- and short-term corporate credit ratings on K+S AG to BBB-/A-3 from BBB/A-2 with a stable outlook; (c) lowered the long-term corporate credit rating on Potash Corp. of Saskatchewan Inc. to BBB+ from A- with a stable outlook, affirmed the A-2 global scale short-term rating and the A-2 global scale and A-1(LOW) Canada national scale ratings on its commercial paper; and (d) revised the outlook on Uralkali OJSC to negative and affirmed the rating at BB-.

S&P said the actions reflect significant weakening of the fertilizer market environment over the past six months and its expectation that nitrogen, phosphate, and potash fertilizer prices will remain well below 2015 levels in the next several years.

The agency therefore forecasts lower earnings and higher leverage for the companies than we anticipated before. It also noted high capital expenditure outlays for EuroChem and K+S in the coming years –related in particular to the finalization of their greenfield potash projects – which S&P expects to lead to material negative free operating cash flow (FOCF).

S&P believes that the companies' rationalization programs as well as weaker currencies in Canada and Russia will only partially offset lower prices.

© 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.