CHICAGO--(BUSINESS WIRE)--Fitch Ratings has affirmed Masisa S.A. (Masisa)'s ratings as follows:
--Foreign and local currency Issuer Default Ratings (IDRs) at 'BB';
--National scale rating of Bond Line No. 355, No. 356, No. 439, No. 440,No. 560, No. 724 and No. 725 at 'A-(cl)';
--Short-term rating at 'F1(cl)';
--Long term national scale rating at 'A- (cl)'.
The Rating Outlook is Stable.
Fitch has also downgraded Masisa's equity rating to 'Primera Clase Nivel 3' from 'Primera Clase Nivel 2'
KEY RATING DRIVERS
Masisa's ratings reflect its sound business position within Latin America as a leading producer of wood boards with 3.4 million of cubic meters installed capacity. The company's operations are concentrated in Chile, Brazil, Argentina, Venezuela, and Mexico. Masisa has Placentro retail stores and commercial offices in Peru, Colombia and Ecuador, and exports to countries outside the region such as the United States. The ratings further incorporate Masisa's ownership of 224,000 hectares of plantations in South America, which along with its forestry land, had an accounting value of USD967 million as of March 31, 2013.
The ratings are constrained by the company's large exposure to Venezuela and Argentina. Combined these markets represented 53% of Masisa's consolidated LTM EBITDA as of March 31, 2013. Challenges in these markets include non-stable currencies, political interference as well as foreign currency transference restrictions. Masisa's net leverage is moderate with a net debt/EBITDA of 3.4 times (x) as of Mar. 31, 2013, in line with the average of last five years.
Fitch has downgraded Masisa's equity rating given its moderate stock liquidity, as it has a market presence of 85% and USD86.5thd average traded volume during the last year. Since the beginning of 2013, Masisa has not been part of the IPSA (Indice de Precios Selectivo de Acciones).
EBITDA GROWTH DESPITE CLOSURE OF MONTENEGRO MDP PLANT
Masisa's EBITDA reached USD241 million during the LTM ended March 31, 2013, an increase from USD224 million as of Dec. 31, 2012, while its EBITDA margins improved to 17.6% from 16.6%. Latin American markets continue to show favorable dynamics, with volume growth in nearly all markets, with the exception of Argentina. In response to improved market conditions, Masisa has implemented a pricing increase. The company has also benefited from a turnaround in the U.S. housing market, which has increased its demand for MDF moldings. These improvements helped the company offset the loss of EBITDA due to a fire at its Montenegro MDP plant in Brazil. The main challenges faced by Masisa are increased competition in the MDP segment in Chile and MDF segment in Brazil. During 2012 panels sales increased 4.7% due to a 14.24% increase in average prices, which more than offset a 1.2% decline in volumes. Sales of other products, including MDF moldings, sawn wood, energy and doors increased 20.2%.
INCREASE IN NET DEBT
As of March 31, 2013 Masisa had USD991 million of consolidated debt and USD164 million of cash and marketable securities, resulting in USD827 million net debt. This figure compares with USD724 million as of Dec. 31, 2012. Masisa's higher net debt position is primarily due to bridge loans taken to finance the acquisition of Rexcel MDP assets in Mexico, among other investments, and the appreciation of the Chilean peso against the dollar. Masisa maintains a 100% hedge of local currency fluctuation against the U.S. dollar. As of March 2013, USD700 million, or 70% of Masisa's consolidated debt is long term. This debt consists of USD439 million of bonds, USD241 million of bank debt and USD19 million of financing leases.
MANAGEABLE LIQUIDITY PROFILE
Masisa should meet short-term debt obligations with a combination of cash, debt refinancing and capital increases. As of March 31, 2013, Masisa had USD291 million of short-term debt. Masisa's Board of Directors approved a USD100 million capital increase. During the second half of 2013, Masisa is expected to go to the international markets to place a USD300 million bond for debt refinancing. To bolster liquidity the company is also considering selling non-strategic forestry assets.
SIGNIFICANT CAPEX PROGRAM
Masisa's capex program has been oriented toward strengthening its Mexican operations due to the strong growth potential of the market, as per-capita consumption of boards is low and the housing deficit is high. Between 2013 and 2015, Masisa plans to invest USD600 million. Key investments include the acquisition of Rexcel and Arclin's assets, new coating capacity in Chile and Brazil, and potentially additional organic growth in Mexico. Financing should be with a USD100 million capital increase, USD300 million of cash from operations (Ex-Venezuela), and USD200 million of proceeds from the divestiture of non-strategic forestry assets. Masisa's financial strategy is to maintain its capital structure and not to increase leverage due to higher capex.
STABLE PERFORMANCE EXPECTED FOR REMAINDER OF 2013
During 2013, Masisa's EBITDA should range between USD230 million and USD240 million and net leverage should be around 3.5x. Chile and Brazil should represent about 45% of EBITDA. The key drivers of EBITDA improvement vis-a-vis 2012 should be a better product mix and favorable demand conditions in Brazil, Mexico and Chile. Competitive pressure will remain high in Brazil and Chile, which will limit price increases. In Argentina, sales should decline due to weak macroeconomic conditions. Volumes should rise in Venezuela, but sales revenues should decline due to the devaluation of the currency during February. Better conditions in the U.S. should facilitate higher export volumes.
RATING SENSITIVITIES
Negative rating actions could occur if debt levels increase, operating cash flow weakens, or the political environment in Argentina or Venezuela deteriorates further. Absent significant debt reduction, positive rating actions are not likely in the short term due to Masisa's reliance upon Venezuela and Argentina for around 50% of its EBITDA.
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research:
--'Corporate Rating Methodology' (Aug.2, 2012)'
--'National Ratings - Methodology Update'
Applicable Criteria and Related Research:
Corporate Rating Methodology
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=684460
National Ratings Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=595885
Additional Disclosure
Solicitation Status
http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=794898
ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.