Moody's Investors Service has placed on review for possible upgrade the Ba2 corporate family rating of PT Semen Gresik Tbk. This rating action follows Moody's decision to place the Indonesian Government's Ba2 rating on review for possible upgrade.
"The review reflects Semen Gresik's strong credit profile relative to its Ba2 rating, supported by its dominant position in the domestic market, high profit margin and consistent net cash position; as of September 30, 2010, Semen Gresik had cash amounting to IDR3.4 trillion and debt of IDR0.4 trillion," says Alan Greene, Moody's lead Analyst for the company.
However, with over 90% of its revenues derived domestically, Semen Gresik is exposed to all the economic, social, and political pressures in Indonesia, as well as the inherent cyclicality of the country's construction materials industry.
"As a result, the rating for Semen Gresik is closely aligned to the rating of Indonesia and an upgrade of the sovereign rating is positivefor the company," says Greene.
In its review, Moody's will evaluate Semen Gresik's ability to sustain its strong financial profile amidst a large capex program and its future expansion strategy. Moody's expects to conclude the rating review of Semen Gresik after the sovereign rating review is concluded.Semen Gresik is 51%-owned by the Indonesian government.
Moody's therefore overlays the company's standalone credit strength with its joint default analysis for government-related issuers. Based on Moody's view of the moderate level of government support and dependence applicable to Semen Gresik, Moody's sees no uplift on its standalone credit rating.
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