S&P Revises Hanwha TotalEnergies' Credit Outlook to 'Negative'

Global credit rating agency S&P announced on the 29th that it has revised Hanwha TotalEnergies' credit rating outlook from "stable" to "negative." The credit rating itself was maintained at "BBB-."

In the first half of this year, Hanwha TotalEnergies posted weak results due to a sharp decline in oil prices, inventory losses, and deteriorating profitability in its chemical division. S&P also projected that the spread of major products would remain low through the end of the year, leading to reduced margins and limited EBITDA generation.

S&P estimated Hanwha TotalEnergies' annual EBITDA at about 270 billion won for this year and about 380 billion won for next year. These figures are lower than previous estimates of 350 billion won and 480 billion won, respectively. S&P explained, "Due to the ongoing sluggish demand resulting from the global economic slowdown, the oversupply in the petrochemical industry is expected to persist for the time being. We anticipate that it will take longer for market conditions to recover, and we assess that downside risks remain relatively high."

Additionally, S&P predicted that the positive effects from reduced cash outflows would be limited. Hanwha TotalEnergies used cash secured from reduced capital expenditures and dividends to pay down debt. The company's annual capital expenditure for 2024 was about 260 billion won, a decrease of approximately 50% compared to the previous year.

S&P stated, "This year, capital expenditures will decrease further to about 230 billion won, then slightly increase next year. Adjusted debt is expected to decline from about 2.3 trillion won in 2023 and about 2.1 trillion won in 2024 to about 1.8 trillion won this year."

S&P also noted that if Hanwha TotalEnergies' profitability or cash flow does not significantly improve within the next one to two years, making it difficult to reduce the debt-to-EBITDA ratio below four times, the credit rating could be downgraded.