Positive outlook on Press Metal

Published on 13 Sep 2024.

RAM Ratings does not expect the recent fire at Press Metal Aluminium Holdings Berhad’s (Press Metal or the Group) smelter to have any impact on the AA2/Positive rating of its RM5.0 bil Islamic MTN Programme (2019/2049).

On 9 September 2024, a fire at Phase 3 of Press Metal’s smelter in Samalaju, Sarawak damaged 100 out of 300 pots or 9% of the Group’s total smelting capacity. On a full-year basis, the incident will reduce production by 3% for fiscal 2024. Operations are expected to be restored within four months, while the estimated damage of around RM100 mil is adequately covered by insurance.

The rating outlook for Press Metal’s RM5.0 bil Islamic MTN Programme (2019/2049) was revised to positive in December 2023 on expectations of significant deleveraging and stronger cashflow generation from a larger production capacity, supporting sustained and meaningful improvements to its credit metrics. Its 1H FY Dec 2024 performance was strong, driven by higher sales volumes, a stronger USD exchange rate and continued favourable aluminium prices. While the Group’s full-year sales performance may marginally dip below our prior expectations following the incident, its strong credit metrics – as demonstrated by its robust annualised debt to operating profit before depreciation, interest and tax and funds from operations debt coverage ratios (1.44 times and 0.69 times, respectively) – provide a sufficient credit buffer to withstand the temporary earnings weakness.

We will be conducting the annual review within the next two months and will make the necessary market update in due time.

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

The credit rating is not a recommendation to purchase, sell or hold a security, inasmuch as it does not comment on the security’s market price or its suitability for a particular investor, nor does it involve any audit by RAM Ratings. The credit rating also does not reflect the legality and enforceability of financial obligations.

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Similarly, the disclaimers above also apply to RAM Ratings’ credit-related analyses and commentaries, where relevant.

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Positive outlook on Press Metal