The Big Three Credit Rating Agencies Upgrade Dongkuk Steel's Credit Rating Outlook for the First Time in 4 Years

[Asia Economy Reporter Kim Hyewon] Dongkuk Steel's corporate credit rating outlook has been upgraded for the first time in four years.

On the 3rd, Dongkuk Steel announced that the three major domestic credit rating agencies?NICE Credit Rating, Korea Credit Rating, and Korea Ratings?have upgraded the corporate credit rating outlook from 'BBB- (Stable)' to 'BBB- (Positive).' This marks a stepping stone for improving the credit rating.

This upgrade in the corporate credit rating outlook is the first change in over four years since 2017. Dongkuk Steel has been improving its financial structure by establishing stable cash flow and continuously repaying borrowings, aiming to recover to an A-grade credit rating.

Since 2018, Dongkuk Steel's debt ratio has been decreasing. Based on consolidated financial statements last year, the debt ratio was 153.7%, down 26 percentage points from the previous year. The net debt dependency, which fluctuated around 40% for three consecutive years since 2016, dropped to 33.3%. In particular, Dongkuk Steel's Brazil CSP steel mill recorded an operating profit of approximately KRW 154.1 billion in the first quarter, marking the best performance since its operation began in June 2016, which positively impacted financial soundness by reducing the deficit.

NICE Credit Rating cited the following reasons for upgrading Dongkuk Steel's corporate credit rating outlook: ▲ reduction of borrowing burden through operating cash generation based on improved operating profitability and decreased working capital burden in 2020 ▲ favorable market environment ▲ expectation that the improvement trend will continue.

In last year's earnings announcement, Dongkuk Steel identified strengthening financial soundness as a task to secure future competitiveness and set achieving an 'A' credit rating as a long-term goal. Dongkuk Steel maintained an 'A+' credit rating until 2012. Due to oversupply of steel products and economic slowdown, the rating fell to 'BB,' a non-investment grade level, in 2015. However, through structural adjustments and profit structure improvements over several years, it was upgraded two levels to the investment-grade 'BBB-' level in 2017.