Fitch lowers Sierra Cables

Fitch Ratings said it downgraded Sierra Cables plc's national long-term rating to BB(lka) from BB+(lka) and placed the ratings on rating watch negative.

“The downgrade reflects Fitch's assessment that Sierra's cash flow will weaken materially due to the business interruption in the domestic construction industry caused by the coronavirus pandemic. We do not expect operating conditions to normalize to pre-pandemic levels for at least 12-18 months, as state and private-sector funded infrastructure projects will be deferred and liquidity pressure will increase among construction companies which are Sierra's debtors,” Fitch said in a press release.

“We forecast Sierra's leverage to increase above 4.5x in the financial year ending March 2021 (FY21), from our estimated 2.7x in FY20. This is based on our forecast that EBITDA could fall by 50% yoy to LKR 300 million and revenue could fall by 38% yoy to LKR 3.6 billion,” the agency said.

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