Fitch Ratings on Friday affirmed Saudi Basic Industries Corporation's ratings (Sabic) at Long-term Issuer Default (IDR) ‘A+', senior unsecured ‘A+' and Short-term IDR ‘F1'. The outlook on the Long-term IDR is stable, the ratings agency added. “The ratings reflect Sabic's strong business position as one of the world's largest petrochemicals companies, and its state-of-the-art world-scale production facilities with close proximity to growing Asian markets. Sabic benefits from access to competitively-priced natural gas feedstock, which results in higher-than-average profitability (31.5 percent EBITDAR margin in FY08) and cash-generation (cash from operations in excess of $11 billion),” Fitch noted. “This helped mitigate the increase in financial leverage, mainly stemming from lower petrochemical product prices during the 2008/2009 recession, and continued high cash outflows related to expansion projects.” The stable outlook reflects Fitch's expectation that Sabic will remain committed to its modest financial policy, the agency added. The ratings reflect Sabic's relationship with its 70 percent shareholder, the Kingdom of Saudi Arabia, and assumed government support for Sabic. “Fitch recognizes the government's strong influence on Sabic as reflected in its representation in five-out-of-seven members on the company's board. Fitch notes Sabic's strategic importance to the country. In addition, Sabic is a major employer in the Kingdom. These considerations are factored into the ratings and enhance Sabic's rating by one notch,” it said.
