China Hongqiao Group to Gain From Strong Industry Conditions, But Short-Term Debt Reliance a Key Weakness, S&P Says

MT Newswires Live08-23

S&P Global Ratings expects China Hongqiao Group (HKG:1378) to benefit from optimistic industry trends, although it noted that the company's dependence on short-term financing is a major vulnerability.

The aluminum producer's revenue and cash flow will gain from the metal's steady price, while its profitability will be boosted by lower power costs and a gradual rise in its lower-tariff production base in the Yunnan province, the rating agency said in a Thursday note.

S&P expects the company's debt to start declining in 2024, with adequate operating cash flow to account for capital expenditures and dividends until 2025.

Meanwhile, the company's short-term debt comprises about 70% of its total debt as of June, S&P said, noting that the guide rapidly rose in the past two years due to greater low-cost short-term domestic financing.

"We expect Hongqiao to continue to lengthen its debt maturity profile over the next one to two years, mainly by refinancing short-term debt using more long-term financing," S&P said.

Price (HKD): $10.36, Change: $-0.22, Percent Change: -2.08%

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