[RAM] RAM Ratings upgrades Press Metal's RM5.0 bil IMTN Programme to AA2/Stable

RAM Ratings has upgraded the rating of Press Metal Aluminium Holdings Berhad’s (Press Metal or the Group) RM5.0 bil Islamic MTN (IMTN) Programme (2019/2049) to AA2/Stable from AA3/Stable.

The upgrade is premised on Press Metal’s faster than expected deleveraging following the unexpected and sizeable issuance of a private placement in April 2022, which raised RM964.5 mil. While its debt level was elevated in the last three years owing to hefty investment expenditures and higher working capital requirements, the Group had already pared down RM1.15 bil of debts in 9M FY Dec 2022 or nearly one fifth of total debts at the beginning of the year. As at end-September 2022, its debt load decreased to RM5.23 bil. The significant reduction in debt and robust profitability during the same period translated to a markedly better annualised debt to operating profit before depreciation, interest and tax (OPBDIT) ratio and funds from operations debt coverage (FFODC) of 1.88 times and 0.51 times, respectively, both exceeding the requirements for an upgrade.

The full commissioning of Press Metal’s new smelter plant (Bintulu Line 3) and Phase 2 of the alumina plant under 25%-owned associate PT Bintan Alumina Indonesia means Press Metal’s business footing is firmer, given improved economies of scale and deeper vertical integration. With strong cashflow contributions from these investments, the Group will be able to further deleverage and meaningfully improve its financial metrics over the next three years. Despite pandemic-related disruptions and extreme aluminium price volatility, Press Metal was able to deliver a resilient financial performance. Its superior cost competitiveness against global peers and stronger financial profile will help the Group navigate future periods of volatility and disruptions. 

As the Group continues to de-gear over the next three years, expectedly by around RM1 bil per annum, its credit metrics are anticipated to strengthen further, supported by favourable aluminium prices and more moderate investment and capital expenditure in the medium term. We expect Press Metal’s gearing and debt to OPBDIT to trend below 0.5 times and 2.1 times, respectively, during the period, while FFODC will remain sturdy at above 0.45 times even under our stressed price scenario of USD2,000/MT. 

The rating reflects Press Metal’s position as Southeast Asia’s largest primary aluminium producer, its superior cost structure, robust cashflow and debt servicing ability, and strengthening balance sheet. The volatility of the aluminium industry, however, is a moderating factor. Listed on Bursa Malaysia in 1993, Press Metal is involved in aluminium smelting and extrusion. The Group is helmed by Tan Sri Dato’ Koon Poh Keong who, together with family members, collectively owns a 58.51% stake (as at 31 March 2022).


Analytical contacts
Hani Hamizah Nor Hashim
(603) 3385 2575
hani@ram.com.my

Thong Mun Wai
(603) 3385 2522
munwai@ram.com.my