Fitch affirms Sifco S
(Sifco): Foreign and Local currency IDRs at Long Term National rating at USD75 million senior unsecured notes due 2016 at The recovery cheap moncler coats mens rating on Sifco cheap moncler jackets mens unsecured uk moncler sale debt issuance reflects a 31% to 50% average recovery in the event of default. The Rating Outlook is Stable. Sifco credit ratings reflect the company high financial leverage and business risk in the cyclical automotive business. Sifco is the moncler outlet online leading suppliers of front axles for trucks and buses in Latin moncler outlet prices America. With a market share cheap moncler jackets womens of over 95%, Sifco is well positioned to benefit from the increasing demand in the Brazil automotive parts sector over the next few moncler online store years. The ratings also uk moncler outlet incorporate Sifco volatile operational margins, despite of the improvements in customer and products diversification over the past year. The strong credit linkage with its parent and other related companies together, G. Brasil Participacoes, with weaker financial profile on a consolidated basis, also pressure Sifco ratings. Due to its solid market position, Sifco entered into a long term commercial partnership with the Brazilian subsidiary of Dana moncler outlet sale Corporation in 2011. This resulted in a cash inflow of approximately BRL250 million, which Sifco s used to improve the company liquidity. In exchange, Sifco transferred moncler sale online all of its front axle sales in Brazil moncler womens jackets to Dana and became Dana exclusive supplier of this product in Brazil with best moncler jackets the possibility of accessing new markets. LEVERAGE STILL HIGH DESPITE AGREEMENT BENEFITS WITH DANA: Sifco leverage is high but improving. In 2011, Sifco net debt/EBITDA ratio of 4.9 times (x) had improved from 5.6x in 2010, following the closing of the commercial agreement with Dana during February 2011. This ratio already reflects the acquisition on October 2011 of the related company, BR Metals, formerly owned directly by G. Brasil Participacoes, Sifco main shareholder. Although it did not involve any cash disbursement, this acquisition negatively impacted moncler outlet Sifco. This was because additional debt into Sifco was BRL100 million, 69% concentrated in the short term, while EBITDA contribution on the fourth quarter 2011 (4Q was BRL14 million. The ratings incorporate the expectation that Sifco net leverage will remain in the 4.0x to 5.0x range during the next 12 to 18 months. The agreement with Dana was expected to decrease Sifco EBITDA by approximately BRL 30 million per year. However, Sifco had improved its EBITDA generation to BRL104.5 million in 2011 from BRL86.2 million in 2010 due to favorable market conditions in 2011 and a more diversified basis of customers and market niches. The decrease on the EBITDA margin to 9.8% from 11.1%, respectively in the same years, reflects the consolidation of BR Metals last quarter results, a company with a weaker operational profile and a more leveraged capital structure and due to the transition plan due to the contract with Dana. BR METALS ACQUISITION FORECASTS SYNERGIES FOR SIFCO OPERATIONS Sifco is solidly positioned as a tier two regional player, with revenues of BRL1.07 billion and BRL777 million during 2011 and linked website moncler outlet https://www.monclerdownjacket.biz 2010, respectively. Sifco had improved its EBITDA generation to BRL104.5 million in 2011 from BRL86.2 million in 2010. Sifco market position is strong with a 98% market share of the front axle production for truck and buses in Latin America. Sifco strength as a supplier of axles in the assembly of trucks and buses increase its importance among the assemblers when compared to other tier two suppliers. As mentioned, Sifco also supplies parts for tractors and dozers undercarriages, as well as forged components for light commercial vehicles and passenger cars. Management strategy in the BR Metal acquisition was to obtain synergies in terms of cost reductions (administrative and sales overlap), raw material acquisitions and revenues as companies will be able to provide combined foundry and forging solutions to its customers. In terms of costs reductions, the synergies are estimated moncler sale outlet at BRL15 million per year, and in terms moncler sale of revenues are yet to be tested. The acquisition also diversifies Sifco exposure to customers and market niches. Dana, its largest customer moncler outlet woodbury in 2011, was expected to correspond 70% of Sifco sales. With a more diversified than expected portfolio of customers from its own operations combined with BR Metals, on a proforma basis, it represented only 30% of the sales in 2011. CASH FLOW NEEDS TO IMPROVE TO REDUCE REFINANCING RISK In 2011, Sifco funds from operation (FFO) of BRL102 million, cash flow from operations (CFFO) of BRL204 million and free cheap moncler sale cash flow (FCF) of BRL146 million were benefited by BRL131 million, due to the agreement with Dana. Excluding this non recurring effect, the company performance would not present an improvement in relation to 2010 (BRL94 million and BRL101 million and BRL87 million, respectively). Besides that, representing around 60% of total adjusted group debt, Sifco had a high short cheap moncler jackets term debt concentration of around 42% of total adjusted debt of BRL681.3 million at the end of 2011. Its cash position of BRL 166.6 million (covering only 57% of short term debt) in conjunction with low cash flow generation adds refinancing risk. LINKAGE WITH WEAKER GROUP CONSTRAINT RATINGS Sifco ratings reflect the linkage with its group, Grupo moncler outlet store Brasil (GB). GB financial profile moncler usa on a consolidated basis is substantially weaker than Sifco on a standalone basis, which constrains Sifco ratings. GB EBITDA is marginally higher than Sifco on a consolidated basis. Incremental debt increases group net leverage by approximately 2.0x 3.0x on a consolidated basis. Historically, Sifco has provided financial support via intercompany loans and unsecured guarantees to related companies that discount moncler jackets had low cash generation. However, with bond issuance in 2011, financial covenants prevent extra intercompany loans in excess of USD15 million. Even though the total intercompany loans decreased by BRL13 million to BRL290 million in 2011, Fitch still believes that a cash call might be made from group companies in an event of distressed markets. Fitch will closely follow management strategy to improve liquidity and debt maturity profiles. Positively factored in the ratings is the group liquidity policy of keeping a minimum cash position of BRL150 million. POTENTIAL RATING OR moncler uk outlet OUTLOOK DRIVERS The ratings could be affected positively by an improvement in GB overall credit profile in terms of leveraging and liquidity as well as operational results. A downturn in the company operating results and material increase in intercompany loans could lead to a negative rating action. (Caryn Trokie, New York Ratings Unit).