Moody's Investors Service said that Winsway Coking
Coal Holdings Limited's 1H 2012 pre-tax loss of HK$684 million - the first such loss since
it listed on the Hong Kong Stock Exchange in October 2010 - will have no immediate impact
on the company's Ba3 corporate family rating and the B1 rating of its USD senior notes.
The outlook for the ratings is negative, reflecting Winsway's deteriorating performance
in a challenging year.
Although operating margin likely will improve in 2H, Moody's expects the improvement to
be limited and therefore insufficient to offset the loss recorded in 1H. Winsway's
stand-alone financial profile will likely stay under pressure for the rest of 2012.
But the negative impact of the down-cycle in coal trading has been mitigated by Aluminum
Corporation of China Limited's (Chalco)(02600) 29.9% investment in Winsway. Shareholders
in both companies have approved the investment. It now awaits regulatory approval by
China's Ministry of Commerce and the National Development and Reform Commission.
Given Chalco's strong relationship with its banks, Winsway will have better access to
funding. Moody's will monitor the progress of Chalco's investment and review the impact on
Winsway's future business strategy and financial position, once it is approved.
Moody's expects Winway's core coal trading business to report a mild margin recovery in
2H 2012, following the disposal in 1H of its high-cost seaborne coal inventory.
It considers that the company's liquidity will remain fairly manageable in the next 12
months. As of June 2012, the company had a total cash balance of HK$3.9 billion, covering
90% of its HK$4.3 billion in short-term debt (including in HK$2.8 billion in trade & bills
payable). Around RMB780 million - out of short-term debt of HK$4.3 billion - represented
the first-year amortization of part of the US$350 million in acquisition debt for Grand
Cache Coal Corporation (GCC). The loan was from China Mingshen Bank. (KL)