Rating agency Fitch has revised the outlook for Mytilineos to negative because the company’s financial leverage has been stretched in a weak market for aluminum users.
The aluminum maker, like other firms in this category, suffers from flagging aluminum prices amid oversupply and weak demand. The company could be further impacted by continued weak demand, which Fitch expects will last through the end of the year because of COVID-19 and low economic activity.
Keeping these factors in mind, Fitch also reduced its aluminum prices outlook to $1,560/mt in 2020 before they rise again to $1,600/mt next year. Despite the downward pressure on prices, Mytilineos is likely to benefit from lower overhead costs, such as gas and electricity, as well as lower raw materials prices, which should help it remain profitable.
A feeble construction market has also influenced the firm’s outlook. Mytilineos provides engineering, procurement, and construction (EPC) for energy projects, and according to Fitch, although the firm is positioned well in this niche segment, it is much smaller than competitors like Grupo Aldesa and Webuild, which could hamper its growth in the EPC market.
The agency also views the Greek company’s leverage as temporary and expects it to end in the next two years. The company has earmarked a large capex of €300mn ($338mn) to build a new power plant, which, once operational in 2022, would help the firm stabilize cash flows and reduce its net leverage.
The agency has kept Mytilineos debt ratings unchanged at BB.
$1 = €0.89