(MENAFN Press) Capital Intelligence (CI), the international credit rating agency, announced today that it has affirmed the Long-Term and Short-Term Corporate Ratings of the Almana Group at 'BBB' and 'A3', respectively. Supporting the ratings are the diversified business model and the medium term nature of much of the Group's funding from its wide banking panel, together with the availability of a substantial level of AFS securities available to fund both debt service and ongoing capital expenditure commitments.
Although not a supporting factor in itself, there is also the probability of improved performance from 2013 onwards. However, this improvement will depend on increased contract awards being made by the Qatari government “ something that although expected, is not assured.
Constraining the rating are the still high levels of debt and leverage, the currently weak underlying earnings and weak cashflow, as well as the heavy CAPEX commitments for 2012 and 2013. Despite the medium term prospects of significantly improved earnings once developing investment properties become income producing, pressures on both cash flow and earnings are expected to continue in the short-term. The Outlook on both ratings is therefore adjusted to Negative.
Although Qatar has shown strong economic growth in recent years, this has not translated into any flow of new government contracts “ many projects have been designed or announced but few tenders have been issued and even fewer contracts awarded. The lack of new contracts awarded hurts Almana both directly as a contractor as well as in other allied business it operates such as automobile sales, rental real estate and others. Fortunately, this 'dry' period appears to be coming to an end and with the pace of contract awards likely to be much faster from early 2013 onwards, most divisions within the group should begin to feel the benefit.
Returning to a 'Stable' Outlook would first require that the group significantly reduce both debt and leverage “ with the level of debt being the more important metric. Also required would be a significant improvement in cash flow overall, and operational cashflow in particular. Finally, profitability would need to show a marked improvement “ and one that was not dependent upon valuation gains.
The information sources used to prepare the credit ratings are the rated entity and public information. Capital Intelligence had access to the accounts and other relevant internal documents for the purpose of the rating, and considers the quality of information available on the issuer to be satisfactory for the purposes of assigning and maintaining credit ratings. Capital Intelligence does not audit or independently verify information received during the rating process.
The rating has been disclosed to the rated entity and released with no amendment following that disclosure. Ratings on the issuer were first released in January 2008. The ratings were last updated in April 2011.
The principal methodology used in determining the ratings is Corporate Rating Methodology. The methodology and the meaning of each rating category and definition of default, as well as information on the attributes and limitations of CI's ratings can be found at www.ciratings.com.