Citic Resources maintains positive outlook amid profit warning: Moody's

Thanks to its strong liquidity position.

Moody's Investors Service says that CITIC Resources Holdings Limited's (CRH) profit warning for 2012 has no immediate impact on its Ba3 corporate family rating and senior unsecured bond ratings.

Moody's adds, the positive outlook for the ratings is also unaffected.

Here's more:

CRH has said that it expects a significant loss for the year ended 31 December 2012 because of (1) a large decline in the year-on-year results of CITIC Dameng (unrated), in which CRH owns 38.98%, and (2) the need for a non-cash provision in respect of its investment in CITIC Dameng.

CITIC Dameng is engaged in the manganese business. CITIC Resources has to make the non-cash provision because the stock price of CITIC Dameng had a big drop during 2012 as well as an expected increase in the decline in the results of CITIC Dameng for the year ended 31 December 2012 as compared with the year ended 31 December 2011.

"We expect such impairment will not have significant impact to CRH's equity base of HKD15 billion as of 30 June 2012, "says Simon Wong, a Moody's Vice President and Senior Analyst.

"In addition, the non-cash provision will have no impact on CRH's cash flow. CITIC Dameng's upstream dividend to CRH of HKD11.8 million for 2011 accounted for a very small portion of CRH's total adjusted EBITDA of HKD2.8 billion in 2011. We therefore see a limited impact on CRH's financial profile," adds Wong.

The Ba3 rating of CRH continues to factor in a two-notch parental uplift from CITIC Group Corporation (Baa2, stable).

The positive outlook reflects CRH's strong liquidity position and its improving credit profile, given the stabilization of its E&P operations and the benefits of diversification from its other commodity-related businesses.

As of 30 June 2012, it had a cash balance of HKD9 billion and total reported debt of HKD12 billion. It also improved its debt maturity profile and liquidity position by signing two new syndicated loan facilities totaling USD780 million in 2012 and repurchasing USD201 million in outstanding notes in 2013.