Expert RA lowers credit rating on Global Ports Investments Plc to ‘ruAA-’
Expert RA has lowered its non-financial company credit rating on Global Ports Investments Plc to ‘ruAA-’ with ‘developing’ implications. Previously, the company was rated ‘ruAA/ stable’, according to the agency’s statement.
Global Ports Investments PLC is the leading operator of container terminals in the Russian market by capacity and container throughput. Global Ports’ terminals are located in the Baltic and Far East Basins. Global Ports’ key assets include First Container Terminal (annual capacity based on capacity of storage facilities – 915,000 TEUs) and Petrolesport (350,000 TEUs) at Great Port of Saint-Petersburg as well as Vostochnaya Stevedoring Company at Vostochny Port. The Group also controls Ust-Luga Container Terminal (235,000 TEUs) at the port of Ust-Luga. Some assets of the Group are owned through joint control. In partnership with CMA Terminals, the Group runs container terminal Moby Dik (275,000 TEUs) in Kronshtadt where container handing stopped in 2020, two Multi-Link Terminals in Finland (420,000 TEUs) and container terminal Yanino Logistics Park located in the Leningrad Region.
The Agency’s analysis is still based on the Group’s IFRS report. The Group’s debt portfolio has no subordinated debt obligations. Its circulating Eurobonds in the amount of some USD 300 million, issued by Global Ports (Finance) Plc, are secured by the guarantees of the Group’s key operating companies and Global Ports Investments Plc. Exchange-traded Ruble bonds issued at the level of First Container Terminal JSC and Vostochnaya Stevedoring Company LLC, in their turn, are secured by offers from the Group’s parent company, Global Ports Investments Plc.
The Group’s rating downgrade should be attributed to due to the dwindling prospect for the development of RF transport industry and container handling in ports in particular, which will entail a significant decrease of business (mainly in the Baltic Basin), both in volume and monetary results of 2022. The change in outlook takes into account the possibility for further deterioration in the operating and macroeconomic environment, which can lead to business reduction exceeding that expected by the Agency, as well as a potential change of the Group's controlling owner, which may also induce the risk of the Group's operating and financial strategy revision.
The Agency’s assessment of the Group's business risk profile is still positive. With its activities in the transport infrastructure segment, the Group operates in the conditions of high entry barriers. Container handling in the Baltic Basin is almost fully concentrated in Great Port of Saint-Petersburg which features limited prospects for capacity expansion of new or existing players due to the port’s physical limits set by its water front location within the city. Capacity expansion of the Far East Basin terminals is also limited, hence their moderate competition with new coal terminals for the territory. The Agency’s assessment of the Group's competitive position is positive as its high market share, sufficiently diversified cargo base and presence in two of the three key container handling regions ensures smooth servicing of trade operations throughout the territory of Russia. In 2021, the group showed an increase of container handling by 2.8%, year-on-year, to 1.576 million TEUs while all ports of the Russian Federation demonstrated a growth of 7.1%. In the Far East Basin, it rose by 14.7% nearly equal to the general market dynamics in the region (+14%). In the Baltic Basin, it fell by 2.2% with the market fall having decreased by 3.7%. As a rule, exporters’ requirements on capacity and technical equipment of terminals are high and that is the Group’s competitive advantage. Although the Group demonstrated good performance in 2021, the Agency takes into account global supply chain disruption and problems with empty containers turnover. Therefore, the Agency expects that trade restrictions caused by the sanctions, both imposed and being discussed, as well as the rejection of international container line operators to call at Russian seaports in the Baltic and the Azov-Black Sea basins will result in essential decrease of container handling at Russian terminals, and at the Group’s terminals, in particular. In 2021, the Group’s terminals in Great Port of Saint-Petersburg and in Ust-Luga accounted for 67% of the total container throughput. In 2022, the Group’s key terminal (in terms of volumes) will be VSC in Vostochny Port while ports of the Baltic Basin are to see a traffic decrease of over 60%, the Agency expects.
The Agency continues to positively assess the Group’s financial profile. The Group follows a conservative financial policy and aims at reduction of its debt burden. In 2021, that aim was achieved in principle – as of 31 December 2021, the net debt to EBITDA ratio for 2021 was 1.9, according to the Agency's calculations. EBITDA interest cost coverage amounted to 4.7. Despite the achievement of debt targets allowing for payment of dividends, no dividends will be distributed for 2021. That, along with limited capital expenditures of primarily supportive nature, will support the anticipated liquidity.
Qualitative assessment of liquidity is hindered by the potential need for partial refinancing in 2023, when Eurobonds of $300 mln are mature. The Agency notes that the Group's financial profile is unlikely to deteriorate significantly despite the loss of a significant part of cargo turnover with its reduced debt and a credit portfolio where fixed rate bonds are prevailing. The Group still runs the currency risk with an essential share of foreign currency debt partially offset by natural hedging – contracts accounting for over a half of revenues foresee indexation of tariffs in case of ruble/dollar exchange rate change by 5-10-15%. After repayment of the Eurobonds in 2023, the Group is going to transit to ruble borrowings. Strengthening of the ruble versus the presentation currency (USD) also has an impact on the Group's estimated financial performance.
The block of corporate risks is still assessed positively and features a high-quality corporate governance system, a high level of information transparency and strategic support. The Agency recognizes that the decision of one of the Group’s two largest shareholders to sell a 30.75-pct stake may lead to a change in control over the Group, consequent change of its operation and financial strategies as well as the debt burden increase as a consequence of this.
According to the IFRS consolidated financial statements of Global Ports Investments Plc for the financial year ended 31 December 2021, the company’s assets as of 31.12.2021 totaled $1.44 billion, capital – $499 million, revenue for 2021 was USD 502 million, net profit – $144 million.
