Coal group Vinacomin given negative rating outlook by S&P

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Standard & Poor's on Wednesday revised the credit rating outlook for state-owned mining group Vinacomin to negative, citing weak cash flows and high capital expenditure as the main reasons.

According to the rating agency, Vinacomin's liquidity is now "less than adequate." As of December 31 last year, the company had VND7.4 trillion in cash, compared with short-term debts of VND8.17 trillion.

"Weaker margins and a large capital spending that is debt funded will likely hurt Vinacomin's credit measures in the next two years, in our opinion. Vinacomin plans to spend US$1.3-1.6 billion annually over the next three years," the agency said, assigning a "BB-" rating to the company.

S&P also noted that Vinacomin's average selling prices for coal will fall this year due to a higher proportion of sales to state utility Electricity of Vietnam at below export prices. It projected gross profit per ton of coal sold at $22-25 for 2012, compared with $28-30 last year.

Vinacomin, or Vietnam National Coal and Mineral Industries Holding Corp. Ltd., requested the government in mid June to cut the 20 percent export tax on coal to a more reasonable level, local media reported.

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According to a report on the government's website, Vinacomin's total coal output for the first six months is expected to reach 26 million tons, similar to the same period last year. The company has sold 20 million tons of the fuel so far, including 7.1 tons of exports.

S&P said it may revise the outlook on Vinacomin to stable if its coal sales increase beyond 55 million tons with gross profit per ton staying above $30.

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