Trans-Oil Achieves Credit Rating Upgrade from Fitch Ratings to B+

Trans-Oil Achieves Credit Rating Upgrade from Fitch Ratings to B+

19.02.2024

Fitch Ratings has upgraded Trans-Oil’s Long-Term Foreign Currency (“FC”) Issuer Default Rating (“IDR”) and Long-Term Local Currency (“LC”) IDR to 'B+' from 'B', with a stable outlook.

The upgrade of Trans-Oil’s IDR reflects the Company’s improved credit profile, on the back of expanded scale of operations and broader geographic diversification beyond Moldova;
This one-notch credit rating upgrade also acknowledges Trans-Oil's positive free cash flow (“FCF”) to continue in FY24, with the Company to remain committed to a prudent financial policy;
Fitch Ratings further highlight as a key rating driver, Trans-Oil's dominant market position in Moldova's agricultural exports and sunflower seed crushing sector, which - coupled with an ongoing expansion into Serbia and Romania – allows the Company to maintain superior EBITDA margins compared to industry peers.

Vaja Jhashi, Trans-Oil’s CEO, said:

"Trans-Oil's recent rating upgrade underscores our commitment to sustainable growth, strategic diversification, and prudent financial management. We have continued to expand our operations and geographic reach, enhancing our market position and resilience against evolving industry dynamics, and heightened geopolitical risks. This upgrade reflects our unwavering focus on delivering value to all our investors, while maintaining a robust financial profile."

Fitch Ratings upgrade highlights:

Lowered Leverage: Trans-Oil's readily marketable inventories (RMI)-adjusted EBITDA net leverage increased to 2.8x from 2.2x in FY22, remaining below historical levels and our previous positive rating sensitivity for the LC IDR of below 3x. Anticipated EBITDA of around USD180-USD190 million is expected to maintain leverage in line with the LC IDR, with potential further contraction due to sustainably positive FCF in FY24 and later.
Superior EBITDA Margin: With an estimated 8% to 9% EBITDA margin projected over FY24-27 (FY23: 8.3%), Trans-Oil maintains higher profit margins than most Fitch-rated peers in the commodity trading sector. Despite profitability decline over the past four years as the company expanded into the trading segment, sustained profitability is anticipated in the medium term, driven by organic business growth and enhanced efficiency of modernized production facilities.
Improved Cash Flows: Trans-Oil's FCF turned positive at USD97 million (6.4% of revenue) in FY23, following outflows of 2% to 6% in FY22-23 due to increased working capital requirements amid high agricultural commodity prices and trading volumes. FCF is expected to remain positive at a low single-digit margin over FY24-27, supporting potential investments and deleveraging efforts.
Strong Market Position in Moldova: Trans-Oil's dominant market position in Moldova's agricultural exports and sunflower seed crushing underscores its IDR. As the largest oil producer and exporter of agricultural commodities in Moldova, the company benefits from owning significant material infrastructure assets, including the country's largest inland silo network and a port terminal in the sole seagoing vessel port.