[RAM] RAM Ratings raises outlook on Press Metal issue rating to positive

RAM Ratings has revised to positive from stable the outlook on the AA2 rating of Press Metal Aluminium Holdings Berhad’s (Press Metal or the Group) RM5.0 bil Islamic MTN Programme (2019/2049). 

The revision is premised on our expectation that the Group will chart sustained and meaningful improvements to its credit metrics, driven by sizeable debt reduction over the next two years. Steady deleveraging will be supported by stronger cashflow generation from a larger production capacity and Press Metal’s continued ability to operate on a low-cost structure. The Group’s balance sheet strengthened considerably in the past year as it slashed RM1.3 bil of borrowings and expanded its equity base following a share issuance exercise in FY Dec 2022. 

Despite softer aluminium prices in fiscal 2023, significant debt trimming together with healthy profitability translated to strong annualised debt to operating profit before depreciation, interest and tax (OPBDIT) and funds from operations debt coverage (FFODC) ratios of 2.03 times and 0.48 times, respectively, as at end-September 2023. Debt pare downs of around RM1 bil annually until fiscal 2025 will create a substantial credit buffer to withstand price volatility or any earnings weakness in the future. 

As its smelter expansion and alumina refining investments are mostly complete and operational, Press Metal is looking to strengthen its extrusion business. A shift in sales volume towards this value-added segment can help drive growth and margin improvement over the medium to long term. Going forward, capital expenditure required for downstream expansions is expected to be fairly moderate, which lowers the risk of steep balance sheet deterioration from any heavy debt uptake. 

Our sensitised projections suggest that Press Metal can comfortably hold its debt to OPBDIT and FFODC ratios at a respective 2.0 times and 0.5 times, even after assuming additional debt for investments of up to RM1.5 bil over the next two years. Without a material increase in debt, these ratios can improve further. RAM will monitor its performance over the next year and consider an upgrade if these metrics can be broadly sustainably maintained at these levels.

The issue rating reflects Press Metal’s position as Southeast Asia’s largest primary aluminium producer, its superior cost structure against global peers, robust cash flow 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 50.34% stake (as at 30 March 2023).


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

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

Media contact
Sakinah Arifin 
(603) 3385 2500
sakinah@ram.com.my