MTD Walkers rating further slashed

The credit rating of construction major MTD Walkers PLC has been further slashed to ‘B-‘ with a Negative Outlook, from ‘BB-‘ with a Negative Outlook, on the group’s falling profitability and increasing debt.  

ICRA Lanka, a unit of Moody’s Investors Service, said it has also revised the rating on MTD Walkers’ Rs.3 billion unsecured debenture to ‘B-‘with a Negative Outlook, from ‘BB-‘ with a Negative Outlook.

Out of the Rs.3.0 billion debentures, Rs.2.1 billion of Type A debentures are waiting for retirement on September 30 and the balance under Type B, two years later. 

“The company is making every endeavour to meet its obligations as per the debenture trust deed,” MTD Walkers recently said in a stock exchange filing. 

ICRA Lanka noted that the deterioration of the company’s financial performance during the past two years was largely due to the regulatory and industry uncertainty.

“… since mid-CY2016, after the reinstatement of the suspended mega construction projects by the new government, tendering activity for new government projects witnessed a significant growth and have resulted in an increased competitive scenario in the construction industry.
However, the company is yet to benefit from the turnaround,” ICRA Lanka said.

MTD Walkers is a leading contractor of state-funded infrastructure projects such as roads, highways and housing projects but the payment delays have caused the group to borrow for its working capital. 

The company has already handed over three Urban Development Authority housing development projects, which were financed on a deferred contractor financing model and the total receivables from these three projects stand at Rs.6 billion. 

The total receivables to MTD Walkers as of June 30, 2018 stood at Rs.23 billion and the company has Rs.29 billion in total outstanding borrowings. 

Meanwhile, the group lost Rs.3.2 billion during the financial year ended March 2018, due to tougher operating conditions characterized by a slowdown in construction and infrastructure activities, excessively higher operating costs and rising finance costs.  

During the quarter ended June 30, the group’s net finance cost almost doubled to Rs.990.2 million. 

According to ICRA Lanka, the gearing level at the consolidated level of the group of companies by June (1Q19) and FY18 has increased to seven times and 6.9 times, respectively, from 2.5 times in FY17.

Malaysia’s MTD Capital Bhd holds a 90.78 percent stake in MTD Walkers PLC.