Dongkuk Steel, Hankyung Credit Rating Upgraded to 'BBB (Stable)'

Positive Evaluation of Increased Operating Output and Continuous Reduction of Borrowings

[Asia Economy Reporter Hwang Yoon-joo] Dongkuk Steel has raised its corporate credit rating by Korea Investors Service in October, followed by Korea Ratings also upgrading Dongkuk Steel's corporate credit rating by one notch.

On the 29th, Dongkuk Steel announced that in Korea Ratings' regular corporate evaluation, its corporate credit rating was upgraded from BBB- (Positive) to BBB (Stable). Korea Ratings cited improved profitability leading to enhanced operating cash flow generation and continued reduction in borrowings as the reasons for the upgrade.

Korea Ratings analyzed that the basis for improved profitability was Dongkuk Steel's consolidated operating cash flow generation ability (EBITDA) margin, which rose from 10.5% as of the cumulative third quarter of 2020 to 15% as of the cumulative third quarter of 2021, indicating higher operating cash flow generation.

Additionally, as evidence of continued reduction in borrowings, Korea Ratings pointed out that the net borrowings on a consolidated basis decreased from 2.3 trillion KRW at the end of 2018 to 1.8 trillion KRW since the end of 2020, and the debt ratio fell from 180% to 154%. Furthermore, the net borrowings/EBITDA ratio improved significantly, dropping to 3.6 times in 2020 and 1.8 times as of the cumulative third quarter of 2021, indicating a substantial enhancement in financial stability metrics.

Korea Ratings expects that Dongkuk Steel will expand investments through the realization of the ‘DK Color Vision 2030’, ESG-related initiatives, and facility improvements, but believes these will be manageable due to the improved operating cash flow generation.

In May, Dongkuk Steel had its corporate credit rating outlook upgraded from ‘BBB- (Stable)’ to ‘BBB- (Positive)’ by the three major domestic credit rating agencies. Subsequently, in October, Korea Investors Service raised Dongkuk Steel's credit rating from ‘BBB- (Positive)’ to ‘BBB (Stable)’.