Fitch Affirms SANLUIS Corp at 'B-/CCC+'.NEW YORK New York, state, United States
New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of -- Fitch Ratings Fitch Ratings
An international rating agency for financial institutions, insurance companies, and corporate, sovereign, and municipal debt. Fitch Ratings has headquarters in New York and London and is wholly owned by FIMALAC of Paris. has affirmed the foreign currency and local currency issuer default ratings of SANLUIS Corporacion, S.A.B. de C.V. (SANLUIS) at 'B-'. In addition, Fitch has affirmed its 'B-' issue rating and 'RR4' recovery rating (RR) on SANLUIS' senior secured bank loans held by SANLUIS' operating subsidiaries and its 'CCC+' issue rating and 'RR5' recovery rating on the 8% senior unsecured notes due 2010 and on the $75 million 7% mandatory convertible Mandatory Convertible
A type of convertible bond that has a required conversion or redemption feature. Either on or before a contractual conversion date, the holder must convert the mandatory convertible into the underlying common stock. debentures due 2011 issued by SANLUIS Co-Inter S.A. (SISA SISA Secure Information Sharing Architecture
SISA Stated Income, Stated Assets
SISA Semiconductor Industry Suppliers Association
SISA Società Italiana per lo Studio dell'Arteriosclerosi
SISA Signal-In-Space Accuracy
SISA Scottish Ice Skating Association ), an intermediary holding company. The Rating Outlook is Stable.
The ratings are based on SANLUIS' business position as leading producer of leaf springs suspension components in the North American Free Trade Agreement North American Free Trade Agreement (NAFTA), accord establishing a free-trade zone in North America; it was signed in 1992 by Canada, Mexico, and the United States and took effect on Jan. 1, 1994. (NAFTA NAFTA
in full North American Free Trade Agreement
Trade pact signed by Canada, the U.S., and Mexico in 1992, which took effect in 1994. Inspired by the success of the European Community in reducing trade barriers among its members, NAFTA created the world's ) market (United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. , Canada and Mexico combined) and Brazil, cost competitive advantages and hard currency generation. The ratings are constrained by high financial leverage, industry cyclicality, cost pressures and the company's history of financial default. SANLUIS' business is critically dependent on North America's automobile market and the performance of the Big Three (General Motors Corp. [GM], Ford Motors Co. and DaimlerChrysler) original equipment manufacturers (OEMs), although in recent years it has sought to diversify its client base and expand sales to Asian and European OEMs. The company targets primarily the light truck market, which over the past 15 years has experienced robust growth and market share gains in North America and at present accounts for approximately 54% of the total automobile market.
During 2006, the company was affected by challenging conditions at the North America auto industry. SANLUIS' revenues remained flat from 2005 as higher sales of suspension components were off-set by lower sales of brake components. A 12% growth in revenues from suspension components was driven primarily by the Brazilian suspension division and increased average prices. During the second half the year, volume sales of both suspension and brake components declined due to lower production and sales of automobiles in North America. Sales of brake components also declined during the year driven by the end-of-cycle of an old GM platform. EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) A metric used to show a company's profitability, but not its cash flow. EBITDA became popular in the 1980s to show the potential profitability of leveraged buyouts, but has become reached US$61 million, 4% down from 2005. Despite higher prices and operating efficiencies, since 2004 operating profit margins Operating profit margin
The ratio of operating profit to net sales. have remained below the levels of 2002-2003 due to high energy and steel costs as well as discounts to OEMs on mature platforms. During the first three months of 2007, revenues grew by 1.3% driven by the suspension business while sales of brake components remained flat. Sales of suspension components grew by 1.8% driven by higher average prices. Lower fixed manufacturing expenses and higher productivity in the suspension business was, however, offset by lower profitability at the brake division.
Consolidated leverage remains high, with a ratio of total debt (including off-balance-sheet debt) to last-twelve months (LTM LTM
long-term memory ) EBITDA of 5.5 times (x) at March 31, 2007. At March 31, 2007, total consolidated debt was
US$341 million, a reduction of $24 million from Dec. 31, 2005. The debt was composed of US$171 million of secured bank loans at the suspension subsidiary level, US$68 million of senior notes (including capitalized interest Capitalized interest
Interest that is not immediately expensed, but rather is considered as an asset and is then amortized through the income statement over time. In the context of project financing, interest that is paid by additional borrowing. ) at the SISA intermediary holding company level due 2010, US$12 million in bank loans due 2009 at the brake subsidiary level, US$12 million of non-restructured debt at the holding company level and US$78 million of convertible debentures issued by SISA (which are off-balance sheet under Mexican GAAP GAAP
See: Generally Accepted Accounting Principles
See generally accepted accounting principles (GAAP). but adjusted as debt by Fitch). The company only pays cash interest on its bank subsidiary debt and the remaining is capitalized. The amortization schedule is manageable over the next three years, with major maturities concentrated in 2010 and 2011 (US$177 million and US$106 million respectively). Short term debt accounts for only 14% of the debt or US$36 million.
SANLUIS expects EBITDA to grow during 2007, driven by the launch of new platforms that were obtained last year at both the suspension and brake divisions. Annual capital expenditures will remain moderate (in the US$10 million-20 million range) due to restrictions under restructured debt agreements. The company should continue to generate positive free cash flow and pay-off debt commitments as due. This should translate into an improvement in credit protection measures by the end of the year.
Notwithstanding, in the near to medium term the company will continue to confront challenging industry conditions due to the negative outlook for the U.S. auto industry and particularly for North American North American
named after North America.
North American blastomycosis
see North American blastomycosis.
North American cattle tick
see boophilusannulatus. OEMs, which face weakening economic conditions, market share erosion in their home market and restructuring costs. Additionally, sales of light trucks remain affected by high fuel prices. Production cutbacks and lower demand would continue to stress volumes. As OEMs struggle to improve their cost structures, this could also result in further pressures on the supplier base (including the company) for lower prices.
SANLUIS manufactures suspension components (leaf springs, coil springs, torsion bars, bushings and stabilizer stabilizer: see airplane. bars) and brake components (drums and rotors) for pickup trucks, SUVs, minivans and automobiles (light vehicles). The company is the largest manufacturer of leaf springs (used in the suspension of light trucks) in the world and the leader in the NAFTA market, where it holds a 92% market share. Sales to Ford, GM and Chrysler accounted for 74% of SANLUIS' total revenues in 2006. In 2006, SANLUIS earned $615 million of revenues and $61 million of EBITDA. More than 75% of revenues derived from exports, almost all to the United States.
Fitch's Recovery Ratings (RR) are a relative indicator of creditor recovery prospects on a given obligation within an issuers' capital structure in the event of a default. A broad overview of Fitch's RR methodology as it relates to specific sectors can be found at www.fitchratings.com/recovery.
In many cases, terms of service are used as a contractual agreement between a company and users of a service they provide. of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures Policies and Procedures are a set of documents that describe an organization's policies for operation and the procedures necessary to fulfill the policies. They are often initiated because of some external requirement, such as environmental compliance or other governmental are also available from the 'Code of Conduct' section of this site.