Standard & Poor's: Long-term Rating of ALROSA Upgraded to 'BB' with "Positive" Outlook
July 21, 2016
On Tuesday, Standard & Poor's upgraded the long-term credit rating of Russia-based diamond miner ALROSA (PJSC) from "BB-" to "BB" confirming the company's short-term rating at 'B'.
The outlook for both ratings is "Positive".
In addition, Standard & Poor's upgraded the rating of ALROSA’s Eurobond issue worth $ 1 billion to "BB" from "BB-".
According to the press note released by the agency, this rating action reflects the opinion of Standard & Poor's regarding the improved operational efficiency of ALROSA due to the weakening of the ruble resulting in the diamond miner’s higher earning power and increased cash flow generated by the company.
In the 1st quarter of 2016, the company generated a record high EBITDA of RUB 60 billion (close to $ 800 million) with Standard & Poor's adjustments taken into account vs. RUB 47 billion rubles in the 1st quarter of 2015, while the miner’s EBITDA margin reached 59%. The company maintained diamond production costs as low as 1900 rubles per carat in open-pit mines and 2,400 rubles per carat in underground mines ($30 and $38 per carat respectively, based on a spot rate). In the opinion of Standard & Poor's, the positive results produced by ALROSA prove its higher than previously expected operating efficiency. The rating agency believes that the company will maintain it in the future and therefore increases its estimate of ALROSA’s business risks from "Weak" to "Acceptable".
According to Standard & Poor's, the company’s business risk profile continues to be influenced by its very strong position in the global market and large reserves of diamonds.